[1/5] Austrian police officers stand in front of OPEC headquarters in Vienna, Austria, June 3, 2023. REUTERS/Leonhard Foeger
VIENNA, June 3 (Reuters) – OPEC and its allies began Saturday with two days of meetings that could culminate in further production cuts of as much as 1 million barrels a day, OPEC+ sources told Reuters, as the group faces falling oil prices and a looming oversupply.
OPEC+, which groups the Organization of Petroleum Exporting Countries and Allies led by Russia, pumps about 40% of the world’s crude oil, meaning its policy decisions can have a major impact on oil prices.
Three OPEC+ sources told Reuters on Friday that austerity was being discussed as options for Sunday’s session. Two other sources said additional cuts were unlikely.
OPEC held a separate brief meeting on Saturday, but ministers declined to comment on potential policy decisions afterward.
The three sources said the cuts could be as high as 1 million barrels per day on top of existing cuts of 2 million barrels per day and voluntary cuts of 1.6 million barrels per day, announced in a surprise move in April and to take effect in May. became.
If approved, this would bring the total volume of reductions to 4.66 million barrels per day, or about 4.5% of global demand.
“This number is premature, we haven’t gone into these things (yet),” Iraqi oil minister Hayan Abdel-Ghani said ahead of meetings, when asked about a possible cut of 1 million barrels per day.
Production cuts usually go the month after they are agreed, but ministers can also agree on a later implementation. They can also decide to keep production stable.
Western countries have accused OPEC of manipulating oil prices and undermining the global economy through high energy costs. The West has also accused OPEC of siding too much with Russia despite Western sanctions over Moscow’s invasion of Ukraine.
In response, OPEC insiders and watchers have said the West’s money printing over the past decade has fueled inflation and forced oil-producing countries to take action to preserve the value of their main export.
Asian countries such as China and India have bought up the lion’s share of Russia’s oil exports and refused to join Western sanctions against Russia.
BASELINE CALLS
OPEC+ ministers will meet in Vienna from 10am (8am GMT) on Sunday, three hours earlier than originally scheduled, and have a full meeting from 11am.
Two OPEC sources said ministers could also discuss new production baselines to which each member is making cuts.
Such conversations have become controversial before.
West African countries such as Nigeria or Angola have long failed to produce in line with their targets, but resist lower base values as new targets could force them into real austerity.
In contrast, the UAE has been pushing for higher baselines in line with its growing production capacity, but that would mean diminishing its share of the overall cuts.
“We look forward to a resolution that will ensure the sustainability of the balance between supply and demand,” UAE Energy Minister Suhail Al Mazroui said ahead of the meetings.
Ministers spoke to reporters at their hotels in Vienna. OPEC has denied media access to its headquarters to reporters from Reuters and other news outlets.
The surprise production announcement in April helped push oil prices by about $9 a barrel above $87, but they quickly retreated, pressured by concerns about global economic growth and demand. On Friday, the international benchmark Brent settled at $76.
Last week, Saudi Arabia’s energy minister Prince Abdulaziz said investors shorting the oil price, or betting on a price fall, “should be wary,” which many market observers interpreted as a warning of additional supplies. .
The International Energy Agency expects global oil demand to increase further in the second half of 2023, potentially driving up oil prices.
However, analysts at JPMorgan said OPEC had not acted quickly enough to adjust supply to a record high in US production and higher-than-expected Russian exports.
“There is just too much supply,” the JPMorgan analysts said in a note, adding that additional cuts could amount to about 1 million barrels per day.
Reporting by Ahmad Ghaddar, Alex Lawler, Maha El Dahan and Julia Payne Written by Dmitry Zhdannikov; Edited by David Holmes, Frances Kerry and Christina Fincher