VIENNA: OPEC and its allies are in discussions to potentially deepen oil production cuts by as much as 1 million barrels per day (bpd), according to three sources cited by Reuters. The talks come as oil prices continue to decline towards $70 per barrel and market analysts express concerns about a new supply glut in the market.
OPEC+, comprising the Organization of the Petroleum Exporting Countries (OPEC) and allied nations led by Russia, is responsible for approximately 40 percent of global crude oil production. Therefore, its policy decisions hold significant influence over oil prices. The sources said that options for further cuts are being discussed among OPEC+ members ahead of the meeting of ministers scheduled for Sunday in Vienna, with an earlier OPEC meeting set for Saturday.
The sources also said that the proposed cuts could amount to 1 million bpd, in addition to the existing cuts of 2 million bpd and voluntary cuts of 1.6 million bpd announced in April. If approved, this would bring the total volume of reductions to 4.66 million bpd, roughly equivalent to 4.5 percent of global demand. However, earlier reports suggested that some OPEC+ sources did not anticipate an agreement on further cuts.
OPEC Counters Western Nations’ Accusations
Accusations from Western nations of price manipulation and economic harm caused by OPEC’s actions have been countered by OPEC officials, who claim that excessive money-printing by Western countries has led to inflation and necessitated action from oil-producing nations to protect the value of their primary export. Iraq’s Oil Minister Hayan Abdel-Ghani affirmed their commitment to achieving balance and stability in the global oil market.
Following the surprise production announcement in April, oil prices initially rose by around $9 per barrel, surpassing $87. However, prices have since declined due to concerns about global economic growth and demand. On Friday, the international benchmark Brent crude was trading at approximately $76 per barrel.
While some market observers interpreted a recent warning from Saudi Arabia’s Energy Minister Prince Abdulaziz as a sign of potential additional supply cuts, Russian Deputy Prime Minister Alexander Novak has stated that he does not anticipate any new measures from OPEC+ during the Vienna meeting, according to Russian media.
The International Energy Agency predicts a further increase in global oil demand in the second half of 2023, which could bolster oil prices. However, analysts at JP Morgan have criticized OPEC for not adjusting supply quickly enough to match the high levels of fuel production in the United States. They suggested that further cuts may be necessary for the alliance to address the issue of oversupply.
Analysts from the Rapidan Energy Group estimated a 40 percent chance of additional cuts being implemented. They emphasized that ministers are determined to prevent a repetition of the 2008 collapse in global economic and financial stability, which caused crude prices.
