OPEC+ Sources indicate talks for significant oil production cuts

In advanced discussions ahead of an OPEC+ ministerial meeting on Thursday, the focus is on an additional oil supply cut to bolster the market, according to sources close to the group. However, the specifics of the cut are yet to be determined.

Current members of OPEC+ including Saudi Arabia and Russia are responsible for more than 40% of global oil supply, with existing supply cuts already in place constituting about 5 million barrels per day – roughly 5% of global demand.

Two sources within OPEC+ revealed that discussions have been taking place regarding a potential deeper collective supply cut in the initial quarter. However, the exact details surrounding the duration and volume are still unclear. It is uncertain whether OPEC+ will be able to come to an agreement on this matter, raising the possibility that the meeting could extend the existing policy.

The Wall Street Journal recently reported that the new cut could potentially reach 1 million barrels per day – a figure also previously reported by the Financial Times on November 17th.

While there were indications on Tuesday of a likely delay in Thursday’s OPEC+ meeting, it now appears that the meeting will proceed as planned, despite having already been postponed from November 26th. Sources attributed the prior delay to disagreement over output quotas for African producers, although it is now believed that the group has largely resolved this issue.

At the same time, discussions over African quotas have been set against the backdrop of the United Arab Emirates’ authorization, under OPEC+’s previous agreement in June, to increase output in 2024.

As of 1836 GMT on Wednesday, global benchmark Brent crude oil was at approximately $83 a barrel. This represents a 1.3% increase, though still off its late September highs of nearly $98, amid concerns about weaker economic growth and expectations of a supply surplus in 2024.

OPEC+ discussions on production quotas have historically faced challenges, most recently at their June meeting where existing oil output cuts were extended into 2024. This was accompanied by an agreement to allow the UAE to increase production capacity due to their efforts in that area.

Saudi Arabia, Russia, and other members of OPEC+ have already committed to total oil output cuts of around 5 million barrels per day, beginning in late 2022. These include a 1 million bpd additional voluntary production cut by Saudi Arabia, set to expire at the end of December, and a Russian export cut of 300,000 bpd until year-end.

Our Standards:
The Thomson Reuters Trust Principles.