Saudi Arabia has asked other members of the OPEC+ alliance to reduce their oil production quotas to stabilize global markets, but some are refusing to comply.
OPEC+’s leader, who asked not to be named because this information is confidential, has cut back on supply by 1 million barrels a week since July. He is now looking for more support from the Organization of Petroleum Exporting Countries (OPEC) and its partners.
Brent crude pared previous losses and was 0.5% lower at $80.15 per barrel as of 4:30 p.m. London time.
The Saudi proposal came amid difficult discussions for the producers group. was forced to delay by four days its policy meeting to Nov. 30, as Angola, and Nigeria refused to reduce their own quotas for 2024 that were set at the cartel’s last conference, in June.
Delegates said that the producers had been working toward a solution to this issue before the weekend but still have not reached an agreement.
After a 17% decline in crude prices in the last two months, amid abundant supplies and a gloomy economic backdrop, the 23-nation OPEC+ coalition is under pressure to intervene on crude markets. Forecasters, including the International Energy Agency, predict that the markets could continue to weaken in early 2024 when a new surplus of oil is expected.
In a recent report, analysts from Eurasia Group headed by Raad alkadiri stated that “with fundamentals easing and market sentiment being bearish, OPEC+ could need to announce a formal cut.” They added that anything less than a reduction of 1 million barrels per day could push prices down to the $70s.
Saudi Arabia’s voluntary 1 million barrels per day production cut, which was implemented alongside a Russian 300,000 barrels per day export reduction, will continue to be in place until the end the year. analysts believe Riyadh will extend these curbs until 2024.
Observers like JPMorgan Chase & Co. warned that OPEC+ could cut more deeply, while others — including Commerzbank AG or hedge fund manager Pierre Andurand – warned that prices would fall further if OPEC+ didn’t. Brent futures were trading near $80 per barrel on Monday.
It would be difficult to coordinate a reduction in oil supply across the alliance, but it could win back oil bulls. Iraq, Russia, and Kazakhstan recently pumped over their quotas while other members like the African ones have lost production capacity to such an extent that they are unable to reduce further.
Uncertain is also whether the United Arab Emirates (a key member) will be pressured to not proceed with an increase in quota of 200,000 barrels per day allowed from January. Abu Dhabi was granted the permission at the June OPEC+ meeting to finally use the new capacity that it has invested in.