Saudi Arabia committed to further cuts in its oil production, setting the tone for the meeting of the alliance of oil exporting countries OPEC + gathered this Sunday (4) in Vienna to outline a strategy to boost prices, which were hampered by uncertainty in relation to the global economy.
The thirteen members of the Organization of the Petroleum Exporting Countries (OPEC), led by Saudi Arabia and which includes Venezuela, along with its ten partners led by Russia, met to reach a common policy.
Saudi Arabia’s Minister of Energy, Abdel Aziz bin Salman, said after the meeting that his country is committed to an additional cut of one million barrels per day (mbd) in its production starting in July, but that this reduction “may be extended”.
Another important announcement made by the oil cartel is that the voluntary cuts in production adopted by nine countries under this agreement, totaling 1.6 mbd and which took effect in May, “will be extended until the end of 2024”, said the deputy prime minister. -Russian Minister, responsible for the portfolio of Energy, Alexander Novak, leaving the meeting.
The meeting at OPEC headquarters started almost three hours later than scheduled, and negotiations were difficult between the 23 countries responsible for 60% of world oil production.
A key issue in the negotiations was the production base, as it serves to calculate the pumping quotas by country and thus configure a joint cut.
The United Arab Emirates, which advocated greater production, managed to increase the base on which its pumping quota is calculated.
According to the Bloomberg agency, this increase generated resistance from African countries such as Angola, Congo and Nigeria, whose quotas were reduced for the next year.
These African countries are already producing at peak capacity, but are barely meeting their pumping targets and are now under additional pressure.
– Fear of a recession –
Delegates gathered amid uncertainty over the global economy, with several negative economic indicators for oil demand.
This meeting took place two months after several OPEC countries announced a voluntary cut in their production quotas to boost prices, a decision that took effect in May, but had a short-lived effect and failed to stop the fall in prices.
Despite oil prices having rebounded over the past two days, prices have fallen by 10% since the surprising announcement made in early April.
Brent oil, a reference in Europe, is at US$ 76 a barrel, and American WTI is quoted at US$ 71, well below the levels reached in March 2022, at the beginning of the war in Ukraine, when they reached almost US$ 140 a barrel.
At OPEC+ meetings, there is often pressure to reduce production and sustain prices, facing resistance from countries that need more revenue from oil.
Furthermore, oil producers rallied at a time when the market is grappling with the impact of inflation, the monetary tightening of major banks, a less fluid than expected recovery in Chinese demand and various turmoil that has affected the financial system.
Prior to the meeting, there had been speculation about whether Saudi Arabia and Russia would arm wrestle due to their differences and differing interests, but the OPEC+ meeting ended up showing a united front.
Russia is reluctant to turn off the oil tap, which generates revenue to fund its military offensive.
Due to sanctions from Western powers, Russian oil can only be traded at a price of $60 or less.
“On the other hand, Saudi Arabia needs higher prices to balance its budget,” Barbara Lambrecht, an analyst at Commerzbank, said in a note.
The Russian minister was emphatic: “We have no disagreements. This is a joint decision taken in the interests of the market.”
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