Saudi Arabia is asking others in the OPEC+ coalition to reduce their oil-output quotas in a bid to shore up global markets but some members are resisting, delegates said.
The OPEC+ leader has been making a largely unilateral supply cutback of 1 million barrels a day since July, and is now seeking further support from across the Organization of Petroleum Exporting Countries and its partners, said the delegates, asking not to be identified because the information is private.
Brent crude pared earlier losses and was down 0.5% at $80.15 a barrel as of 4:39 p.m. in London.
The Saudi proposal comes amid difficult talks for the producers’ group, which was forced to delay its policy meeting by four days to Nov. 30 as Angola and Nigeria resist reductions to their own quota limits for 2024, which were set out at the cartel’s last conference in June.
The producers were progressing toward a compromise on this matter before the weekend, but have yet to clinch an agreement, delegates said.
The 23-nation OPEC+ alliance faces pressure to intervene in crude markets, following a 17% drop in prices over the past two months amid plentiful supplies and a darkening economic backdrop. Markets could weaken further in early 2024, when forecasters including the International Energy Agency anticipate the emergence of a new supply surplus.
“With fundamentals softening and market sentiment bearish, OPEC+ may need to announce another formal cut,” analysts at Eurasia Group led by Raad Alkadiri said in a report. Anything short of a 1 million barrel-a-day reduction could send prices to the low $70s, they added.
Saudi Arabia’s voluntary production cut of 1 million barrels a day, implemented in tandem with a 300,000 barrel-a-day export reduction from Russia, is currently set to continue until the end of the year. Most analysts expect Riyadh and Moscow to extend those curbs into 2024.
Market watchers such as JPMorgan Chase & Co. have flagged the possibility that OPEC+ may cut deeper, and some — such as Commerzbank AG and hedge fund manager Pierre Andurand — have warned that prices may buckle further if they don’t. Brent futures traded near $80 a barrel on Monday.
Supply reductions across the alliance would probably win back oil bulls, but they could be hard to orchestrate. Iraq, Russia and Kazakhstan have recently been pumping over their quotas, while others like the African members have lost so much production capacity they’re in no position to cut further.
It’s also unclear whether the United Arab Emirates, a key member, will be under pressure not to proceed with a quota increase of 200,000 barrels a day permitted from January. Abu Dhabi secured the dispensation at the last OPEC+ gathering in June, in order to finally make use of recent investments in new capacity.
--With assistance from Ben Bartenstein.
(Updates with analyst comment in seventh paragraph.)
Author: Fiona MacDonald, Grant Smith and Salma El Wardany
