December 8, 2023

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Sources said that Saudi Arabia is planning new oil cuts within the framework of the OPEC + agreement

Sources said that Saudi Arabia is planning new oil cuts within the framework of the OPEC + agreement
  • OPEC+ reaches agreement on policy – two sources
  • OPEC+ wants to adjust production baselines – Sources
  • The size and timing of the cuts remains unclear

VIENNA (June 4) (Reuters) – Saudi Arabia will pledge new voluntary production cuts as part of a broader OPEC+ agreement to curb output as the group grapples with lower oil prices and an imminent oversupply, sources told Reuters.

The sources said the group, known as OPEC+, reached an agreement on production policy after seven hours of talks.

Two OPEC+ sources said the group is likely to maintain the current production deal for 2023 and make additional cuts in 2024 if new production baselines are agreed for members, from which the cuts were made.

It was not clear when Saudi Arabia would start making voluntary cuts or how much cut Riyadh and OPEC+ as a whole would cut.

OPEC +, which includes the Organization of the Petroleum Exporting Countries and allies led by Russia, pumps about 40 percent of global crude, which means that its political decisions can have a significant impact on oil prices.

Since Friday, OPEC+ sources have told Reuters that additional production cuts could be as much as 1 million bpd in addition to the existing cuts of 2 million bpd and voluntary cuts of 1.6 million bpd, which were announced in a surprise move in April and took effect in May. .

The April announcement helped push oil prices towards $9 a barrel, above $87, but they quickly fell back under pressure from concerns about global economic growth and demand. On Friday, the international benchmark Brent crude settled at $76.

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If approved, the new cut would bring the total volume of cuts to 4.66 million barrels per day, or about 4.5% of global demand.

Normally, production cuts take effect a month after they are approved, but ministers can also approve implementation later.

Last week, Saudi Energy Minister Prince Abdulaziz said investors who cut oil prices or bet on lower prices should “watch out,” which many market watchers interpreted as a warning of additional supply cuts.

Western countries accuse OPEC of manipulating oil prices and undermining the global economy through high energy costs. The West also accused OPEC of standing by Russia despite Western sanctions over Moscow’s invasion of Ukraine.

In response, OPEC insiders said that money printing by the West over the past decade has driven inflation and forced oil-producing countries to work to preserve the value of their main exports.

Asian countries, such as China and India, bought the largest share of Russia’s oil exports and refused to join Western sanctions against Russia.

The most influential members of OPEC and the largest Gulf producers, led by Saudi Arabia, were trying during Sunday’s meeting to persuade under-production African countries such as Nigeria and Angola to have more realistic production targets, sources said.

Nigeria and Angola have long failed to produce in line with their targets, but they have opposed lower baselines because the new targets could force them to make real cuts.

By contrast, the UAE has demanded a higher baseline in line with its increasing production capacity, but this could mean that its share of overall cuts could decline.

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OPEC denied media access to its headquarters to journalists from Reuters and other news media.

(Covering) Ahmed Ghaddar, Alex Lawler, Maha El Dahan and Julia Payne. Writing by Dmitry Zhdannikov; Editing by Hugh Lawson, Emilia Sithole Matares, and Barbara Lewis

Our standards: Thomson Reuters Trust Principles.