Daily Management Review

OPEC+ Reportedly Discussing Tightening Oil Production Cuts: Reuters


OPEC+ Reportedly Discussing Tightening Oil Production Cuts: Reuters
As oil prices dipped towards $70 per barrel and market experts talked about a fresh supply glut on Friday, OPEC and its allies are talking about further reducing oil production, possibly by as much as 1 million barrels per day, according to a report by Reuters quoting information from sources.
Around 40% of the world's crude is produced by OPEC+, a grouping comprising the Organisation of the Petroleum Exporting Countries and allies led by Russia, therefore the group's political actions can have a significant effect on oil prices.
Cuts are one of the alternatives being discussed for Sunday when OPEC+ ministers meet in Vienna at 2:00 p.m. (12:00 a.m. GMT), according to three OPEC+ sources. OPEC ministers will first convene on Saturday at 11 a.m.
According to the sources, additional cuts of 1 million bpd could be made on top of the 2 million bpd now being made and the 1.6 million bpd in voluntary reduction that were unexpectedly announced in April.
If accepted, the overall amount of reductions would reach 4.66 million bpd, or around 4.5% of global consumption. Two OPEC+ sources had already stated that they did not anticipate the group to agree to additional cuts.
Western countries have charged OPEC with manipulating oil prices and harming the world economy by driving up the cost of energy.
The West's money printing during the past ten years, according to OPEC officials and insiders, has fueled inflation and compelled oil-producing countries to take action to preserve the value of their primary commodity.
"We will never hesitate to take any decision to achieve more balance and stability (on) the global oil market," Iraq's Oil Minister Hayan Abdel-Ghani said on arriving in Vienna.
Oil prices rose $9 per barrel to over $87 in April as a result of the unexpected output announcement, but they quickly fell back due to worries about demand and global economic development. International benchmark Brent was trading at about $76 on Friday.
Prince Abdulaziz, the energy minister for Saudi Arabia, warned investors who were shorting the oil price to "watch out" last week, which many market observers saw as a threat of further supply cuts.
Alexander Novak, the deputy prime minister of Russia, later declared that he did not anticipate any fresh actions from OPEC+ in Vienna, according to Russian media.
The International Energy Agency anticipates that in the second half of 2023, there will be an increase in global oil demand that might push up oil prices.
However, JP Morgan analysts claimed that OPEC had not responded swiftly enough to adapt supply to high levels of American gasoline output.
"Demand growth continues to be robust. Rather, there is simply too much supply... The alliance waited too long to reduce supply. The alliance - or at least some members - would likely need to cut more," analysts from JP Morgan said in a note.
Analysts at Rapidan Energy Group estimate that there is a 40% possibility of another cut.
"Ministers are determined to avoid a repeat of 2008, when a sudden collapse in global economic and financial stability sent crude prices from over $140 to $35 in six months," they wrote.