The influential Organization of the Petroleum Exporting Countries coalition and its allies, collectively known as OPEC+, on Thursday opted against formally deepening production cuts, while de facto leader Saudi Arabia extended its 1 million barrel per day voluntary trim into the first quarter, and other members announced further reductions.

The policy steps were decided in a virtual meeting delayed by internal disagreements over the baselines — the levels off which quotas are decided — of the OPEC group’s largest West African members, Nigeria and Angola. The spat postponed talks initially scheduled to be held in person in Vienna over the weekend of Nov. 25-26. The baselines of Angola, Nigeria and Congo remain under study.

The OPEC+ alliance had already instituted a 2 million barrel per day cut in place until the end of 2024, with several coalition members voluntarily pledging a further 1.66 million barrel per day decline over that same period.

While OPEC+ has not formally endorsed production reductions, market participants are following the possibility of further voluntary cuts announced by key participants to the coalition. Already, Saudi state media has announced that Riyadh will extend its voluntary reduction of 1 million barrels per day, which it has had in place since July, until the end of the first quarter of 2024.

Russian Deputy Prime Minister Alexander Novak, who represents his country in OPEC+ affairs, has said Moscow will implement a voluntary supply cut totaling 300,000 barrels per day of crude and 200,000 barrels per day of petroleum products over that same period, according to a Google-translated statement on Telegram.

Close Saudi ally Kuwait will enforce a 135,000 barrel per day reduction in the first quarter, while the Energy Ministry of OPEC member Algeria said it would trim a further 51,000 barrels per day. Oman said it will also reduce output by 42,000 barrels per day in that same period.

Source : CNBC

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Saudi Arabia’s oil policy is based purely on supply and demand, Crown Prince Mohammed bin Salman said Sept. 20, in an interview broadcast on Fox News.

“We just watch supply, demand. If there is a shortage of supply, our role in OPEC+ is to fill the shortage. If there is oversupply our role is to measure that for stability of the market,” he said, when asked about OPEC+ supply cuts benefiting Russia.

Saudi Arabia has faced criticism for sticking to its cooperation with Russia and introducing major cuts, at a time when Western countries have imposed wide-ranging sanctions in response to Russia’s invasion of Ukraine. Production cuts have boosted prices, helping Russia to deal with sanctions, spiraling war costs and discounts on its crude.

The Crown Prince said that invading a country is really bad, but Saudi Arabia has a good relationship with both Russia and Ukraine. He pointed to cooperation with Iran continuing within OPEC, despite political tensions, as a further example of how supply and demand, rather than geopolitics, governs Saudi production policy.

Saudi Arabia is pursuing a policy of significant crude production cuts, despite expectations of a supply squeeze at the end of 2023 and a significant increase in oil prices in recent months. It is cutting alongside other OPEC+ producers, including Russia, the largest non-OPEC producer in the group.

OPEC’s latest forecast is for global oil demand to outstrip supply by more than 3 million b/d in the fourth quarter of 2023. Oil prices have also seen a significant rise in recent months. OPEC+ producers have not yet indicated that these two factors require any adjustment to current quotas.

Saudi energy minister Prince Abdulaziz bin Salman said Sept. 18 that OPEC and its allies will continue to be “proactive, preemptive and precautious” in managing the market.

Oil prices have risen significantly since Saudi Arabia announced its latest voluntary cuts. Platts, part of S&P Global Commodity Insights, assessed Dated Brent at $95.725/b on Sept. 20, up from $74.605/b at the start of June.

Saudi Arabia’s production is now at a two-year low of 9 million b/d — a level it expects to maintain until the end of 2023. S&P Global expects Saudi Arabia to maintain its 1 million b/d cut until the end of the year.

Russia is also curtailing production, with its latest pledge to cut 300,000 b/d of supply up to the end of 2023. Both countries have said that output plans will be reviewed on a monthly basis.

The next meeting of the committee that oversees the OPEC+ agreement is due to meet on Oct. 4 to discuss market conditions and production volumes. A full OPEC+ ministerial meeting is scheduled for Nov. 26. The deal also includes the option to hold extraordinary meetings if necessary.

Source : S&P Global

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