2023-11-17T20:10:49+00:00
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/ Three OPEC+ sources told Reuters that the group is scheduled to study whether to make an additional cut in oil supplies when it meets later this month, after prices fell by about 20 percent since late September.
The price of oil fell to about $79 per barrel of Brent crude from the highest level in 2023 recorded in September, near $98. Concerns about demand and a potential surplus next year have pressured prices, despite support from OPEC+ cuts and conflict in the Middle East.
Saudi Arabia, Russia and other members of OPEC+ have already pledged to reduce overall oil production by 5.16 million barrels per day, or about five percent of daily global demand, in a series of steps that began in late 2022. The reduction includes 3.66 million barrels per day from OPEC+ in addition to a voluntary reduction. From Saudi Arabia and Russia.
An OPEC+ source, who requested to remain anonymous, said that the current restrictions may not be sufficient and the group is likely to discuss the possibility of implementing further cuts at its meeting. Two other OPEC+ sources said deeper cuts were likely to be discussed.
“It is not good to see greater market volatility before the next meeting while fundamentals remain generally strong,” one OPEC+ source said. “Ministers are likely to express some ideas about what further measures need to be taken to ensure a stable trend.”
Ministers from OPEC+, which includes the Organization of the Petroleum Exporting Countries (OPEC) and allies led by Russia, will meet on November 26. The group already has a plan, drawn up at its previous meeting in June, to reduce supplies by 3.66 million barrels per day until 2024.
OPEC and the Saudi Ministry of Energy did not respond to requests for comment on Friday.
Prices fell further this week, even after OPEC said in a monthly report that oil market fundamentals remain strong despite “negative sentiment,” and stuck to its relatively high forecast for oil demand growth in 2024.
The International Energy Agency, which also updated its forecasts this week, has lower expectations for demand growth in 2024 and said that the market may turn into a surplus in the first quarter.
Three sources said that a larger cut might have to be made, but two other OPEC+ sources said it was too early to discuss the possibility of discussing further cuts, while another source did not suggest this, taking a “wait and see” approach.
OPEC+ does not have a specific target for oil prices. Members depend on oil as the primary source of government income.
Analysts told Reuters that Saudi Arabia’s extension of oil cuts exacerbates the risks of a contraction in the Saudi economy this year.
In previous meetings, Saudi Arabia repeatedly stressed its desire to see a strong commitment to the reduction, so that all members share the burden of reducing production.
At its previous policy meeting in June, OPEC+ agreed to a broad agreement to limit supplies until 2024, and Saudi Arabia pledged a voluntary production cut in July of one million barrels per day, and has since extended the cut to continue until the end of 2023.
Some analysis companies, including Energy Aspects, expect Saudi Arabia to continue the voluntary reduction until at least the first quarter of 2024.