Riyadh on Sunday announced it would slash output further by one million barrels per day in a bid to prop up prices, despite fears of a recession.
The announcement came following a meeting of the 13-member Organization of the Petroleum Exporting Countries (OPEC) headed by Saudi Arabia and its 10 partners, led by Russia.
The cut is for July but “can be extended”, Saudi Energy Minister Prince Abdulaziz bin Salman told reporters.
It is a “voluntary” cut announced after the in-person hours-long OPEC+ meeting at the group’s headquarters in Vienna, which saw some tough negotiations.
Analysts had largely expected OPEC+ producers to maintain their current policy, but signs emerged this weekend that the 23 countries may make deeper cuts.
An output cut of one million barrels per day (bpd) was being discussed, according to the source close to the talks.
In April, several OPEC+ members agreed to cut production voluntarily by more than one million bpd — a surprise move that briefly buttressed prices but failed to bring about lasting recovery.
– Fight over quotas –
Bloomberg news agency reported a fight with the grouping’s African members threatened to derail the gathering.
While the United Arab Emirates was pushing for a change to the way its output cuts are measured, African countries were reluctant to give up some of their unused quotas — a politically unpalatable option, it said, citing delegates.
Several OPEC+ nations — including Angola and Nigeria, already seeming to be at maximum capacity — have struggled to meet their quotas.
Oil producers are grappling with falling prices and high market volatility amid the Russian invasion of Ukraine, which has upended economies worldwide.
Oil prices have plummeted about 10 percent since the April cuts were announced, with Brent crude falling close to $70 a barrel, a level it has not traded below since December 2021.
Traders worry that demand will slump, with concerns about the health of the global economy as the United States battles inflation and higher interest rates while China’s post-Covid rebound stutters.
– ‘No disagreement’ –
Russia’s Deputy Prime Minister Alexander Novak said the current output cuts were being extended until the end of 2024 after examining the matter “for a long time”.
Russia is dependent on oil revenues with its war in Ukraine dragging on and Western sanctions hitting its economy.
Novak “sees no need for OPEC+ to change course” because it would hardly benefit from higher prices, Commerzbank commodity analysts said in a research note ahead of the meeting.
Since Western sanctions hit Moscow over Ukraine, Russia has been shipping oil to India and China as the Asian giants soak up the cheap crude.
Saudi Arabia, on the other hand, “does need higher prices to balance its budget”, Commerzbank analysts said, adding that the kingdom’s break-even price is currently “at a good 80 dollars per barrel”.
Despite the tensions, both of the top OPEC+ producers “will no doubt be keen to keep the cartel together, as it has more power thanks to the united front it is showing”, they said.
In March 2020 the alliance was pushed to the brink of collapse when Moscow refused to cut oil production even as the Covid pandemic sent prices into freefall.
After negotiations broke down, Riyadh flooded the market by boosting exports to record levels before the two countries came to an agreement.
Asked if there were disagreement with Saudi Arabia this weekend, Novak said “No, we had no disagreements, it is a common decision.”
OPEC+ countries produce about 60 percent of the world’s oil.
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