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A group of major oil producers known as OPEC+ on Sunday embarked on a complex production adjustment effort aimed at halting the recent drop in oil prices, including an additional cut of 1 million barrels per day by Saudi Arabia. Agreed. Arabia.
Saudi Arabia’s cutbacks will last for a month starting in July, but could be extended.
The group, which includes Russia and its allies, has come under pressure to strike a deal that will overturn the pessimism that has dominated oil markets in recent weeks. Oil prices have fallen about 15% over the past seven months, despite two major production cuts since October.
The deal, the result of lengthy negotiations on Saturday and Sunday, readjusts production quotas for several countries, with the United Arab Emirates raising production levels and several others lowering them. is what happened. “This is by no means a clean and simple deal,” said Richard Bronze, head of geopolitics at research firm Energy Aspects.
Agreement includes voluntary cuts of 500,000 barrels per day Moscow announced in February.
Comments at a post-meeting press conference revealed skepticism about whether Russia would adhere to these low production levels. Russia’s high production levels and growing share in Asian markets, including India, often at the expense of Middle Eastern oil producers, has become a sensitive issue within the group.
UAE Oil Minister Suhail Al-Mazrouei said, “Some of the data coming from Russia does not fit at all.” He said Russian officials “have been in touch to explain the numbers.”
In a statement, OPEC+ said it was acting “to achieve and maintain stable oil markets” and continued its recent “proactive and preemptive” approach.
As far as the market is concerned, the main feature of the agreement will be further production cuts by Saudi Arabia, which will bring Saudi production to around 9 million barrels per day. Saudi Oil Minister Prince Abdulaziz bin Salman called the move a “Saudi lollipop” while announcing the move at a press conference.
Prince Abdulaziz had hinted before the talks that layoffs were imminent, but ended up being the only official to agree to immediate cuts.
He may have won a long-term concession. With the deal, OPEC+ seeks to address long-standing contradictions that have made some of the group’s production decisions almost incomprehensible. For example, some oil producers, including Nigeria and Angola, have failed to meet their targets for many years due to lack of investment and other problems. They are trying to meet their quota from 2024.
At the same time, the United Arab Emirates, which is investing billions in expanding its oil production capacity, won a modest victory on Sunday, increasing its quota by 200,000 barrels per day from 2024. The United Arab Emirates has long sought. It even threatened to exit OPEC in 2021 in a rare public duel with Saudi Arabia in order to produce more oil.
As oil is vital to the economies and governments of many of these countries, it was not surprising that the difficult issue of dealing with quotas resulted in an evening-long conference in Vienna.
Energy Aspect’s Bronze said the deal sought to address a problem that has plagued the group. “I think there’s real substance here as the market gets the details,” he said.
Oil officials met over the weekend to decide how to deal with a market that has been sluggish in recent weeks. Prince Abdulaziz has been particularly vocal in warning that the group could inflate prices and cut production to stumble traders betting on lower prices.
Other producers, including Russia, are less enthusiastic about scaling back production.
Sunday’s meeting came just two months after OPEC+ announced early production cuts. Those cuts began in May, but had little time to make an impact. Analysts also said the oil market, which has plunged about 12% in prices since mid-April, has been hit hard by broader economic factors, including China’s weaker-than-expected economic growth after the end of its “zero-corona” policy. Says. This could mitigate the impact of supply cuts.
The international benchmark Brent oil price rose about $3 a barrel to about $76 on Thursday and Friday after the U.S. government reached a debt ceiling deal, but prices are still ahead of the April rate cut. slightly below the previous level.
Saudi Arabia’s announcement comes days before US Secretary of State Anthony Brinken plans to visit Saudi Arabia for talks with Saudi leaders.
Saudi Arabia is the de facto leader of OPEC+, and under the rule of Crown Prince Abdulaziz and his half-brother Crown Prince Mohammed bin Salman, the country has become more active in its oil policy and market developments. Maintain a floor on the price rather than relying on
Saudi Arabia’s chief policymaker, Prince Mohammed, wants big oil revenues to fund his ambitious development plans.
OPEC has not released a price target and officials have said they are taking a long-term view, but analysts say Saudi Arabia is currently trading below $80 a barrel for Brent oil. He says he feels uncomfortable being there. OPEC+ produces more than 40% of the world’s oil supply, and if the group puts enough effort into it, it can wield significant market influence.
In the past, Saudi-led cuts to OPEC have caused friction with the Biden administration, which has eased pressure on U.S. drivers to avoid putting the brakes on an already faltering global economy. In order to do so, we want to hold down crude oil prices.
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