OPEC+ extends its production cut until the end of 2024

by time news

2023-06-04 22:07:25

The oil and energy ministers of the alliance OPEC+made up of 23 countries, agreed this Sunday in Vienna extend for another yearuntil the end of 2024, the clippings of your pumping.

In addition, they reached a compromise on the internal quota distribution production as of January 1, 2024, which will leave the group’s total offer at 40.46 million barrels per day (mdb), according to the final statement of the ministerial meeting held this Sunday.

In this way, both the 2 mbd cut adopted in October 2022, as well as a large part of the voluntary reductions announced in April, for a total of 1.66 mbd, remain in force, which until now have not had the desired effect. to raise the price of crude to more than 80 dollars/barrel.

fear of a recession

Delegates met in an atmosphere of uncertainty about the global economy, with several negative economic indicators for the demand for crude oil. Crude producers flocked to this enclave at a time when the market is threatened by the impact of inflation, the monetary tightening of the big banks, a less fluid than expected recovery in Chinese demand and various turbulences that affected the Finance system.

This meeting was held two months after several of the countries in this cartel announced a voluntary cut in their production quotas to boost prices, a decision that came into force in May but had a short-lived effect and did not stop the fall of the quotes.

Despite the fact that oil prices rebounded in the last two days, prices have fallen by 10% since the surprise announcement made in early April.

Brent, which is the reference in Europe, is at 76 dollars a barrel and the US marker WTI is trading at $71, far from the levels reached in March 2022 at the start of the war in Ukraine, when they reached around $140 a barrel.

arduous negotiation

The meeting at OPEC headquarters began almost three hours after schedule and the negotiation was arduous between these 23 countries responsible for 60% of world crude oil production.

A key issue in the negotiation was the production base because it is used to calculate the pumping quotas per country and thus be able to configure a joint cut.

Los United Arab Emirateswho advocated for a greater productionmanaged to increase the base on which their pumping quota is calculated.

According to the Bloomberg agency, this increase generated reluctance from African countries such as Angola, Congo and Nigeria, whose quotas were cut for next year. These African countries are producing at full capacity but are barely meeting their output targets and are now under added pressure.

Saudi Arabia cuts its offer

Furthermore, prior to the appointment there was speculation as to whether Saudi Arabia and Russia would face each other over their differences and dissimilar interestsbut the OPEC+ meeting closed showing a united front.

Russia is reluctant to turn off the oil tapwhich provides Moscow with income for finance his military offensive. Due to sanctions by Western powers, Russian crude can only be traded at a price of $60 or less.

“In contrast, Saudi Arabia needs higher prices to balance its budget,” Barbara Lambrecht, an analyst at Commerzbank, said in a note. In this sense, the Russian minister was blunt: “We have no disagreements. This is a joint decision taken in the interest of the market.”

In this regard, Saudi Arabia made the decision to reduce its crude supply by one million barrels per day starting next July 1st, a “voluntary” clipping that it will implement in addition to continuing to comply with the pumping limitations to which it has committed in OPEC+.

This was announced by the Saudi Minister of Energy, Abdelaziz bin Salman, at a press conference after participating in the conference.

The next ministerial conference of the Organization of Petroleum Exporting Countries (OPEC) and its ten allies, led by Russia It has been called for next November 26.

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