How OPEC+ Talks About Further Oil Production Cuts Could Impact Global Supplies
After a turbulent year with oil prices falling from over $120 to $70 per barrel, the OPEC+ group is engaged in talks that would cut international oil supplies by up to 1 million barrels per day. The decision could prove challenging, as weaker African members of the group, including Angola and Nigeria, may be unable to take such measures due to years of underinvestment. Both countries are already struggling to meet current production targets. While Saudi Arabia is expected to lead this effort, which would mark the third consecutive reduction for the group, Russia, Kazakhstan and Mexico will also participate in these discussions.
The Potential for Complications
The meeting will be difficult for some members, particularly the UAE, which have been pressing for increasing their production baselines to match their growing capacity. This could potentially undermine the push towards further production cuts. The confirmed outcome of the talks could significantly impact oil prices, as a cut in oil production would likely translate into higher prices for consumers. Saudi Arabia, in particular, is looking to stabilize oil prices as it needs to balance its budget by maintaining prices above $80 per barrel, according to the IMF. With the budget financing some large-scale initiatives, such as the Crown Prince’s ambitious “giga projects,” both the country’s financial position and broader economic transformation could be jeopardized with sustained low prices.
The OPEC+ Group and Russia
OPEC has faced mounting criticism over the years for its close ties with Russia and their shared interests. Some experts claim that OPEC’s decision to prop up prices are intended to come into play during energy crises brought on by Moscow’s actions. As OPEC deliberates this latest challenge, including the escalating situation in Ukraine, its relationships with Russia will be especially scrutinized. Falling oil prices since October may have made the White House more optimistic about further production cuts, however. As the United States tries to mend ties with Saudi Arabia, they will watch with interest and could weigh in on the matter.
The Disruption of Press Coverages
As tensions mount, there has also been an unusual development regarding the involvement of the press. For the first time in decades, OPEC has shut out various news organizations, including Reuters and Bloomberg, from last weekend’s meetings. The Saudi Energy Minister, Prince Abdulaziz, has also expressed his displeasure with some of the press, hinting they have been misrepresenting their discussions. Overall, there are numerous factors at play in these talks, particularly given the stakes for participants’ economies and the geopolitical situation around the world.
Summary
The OPEC+ group is currently engaged in talks about cutting international oil supplies by up to 1 million barrels per day with Saudi Arabia leading this effort. Weaker African members of the group are struggling to meet current production targets, potentially complicating matters. While these discussions continue, there is also mounting speculation over the relationship between the OPEC+ group and Russia, with some experts suggesting that the alliance is intended to offer mutual support during energy crises. The confirmed outcome of these talks could have significant implications for global oil supplies and prices. Finally, the press has been barred from attending the most recent meeting, adding a new dimension of uncertainty to these discussions.
Why the OPEC+ Talks’ Outcome is Crucial to Global Oil Prices and Production
With international oil supplies and prices at stake, the outcome of these talks is critical to the global economy. As it stands, Saudi Arabia is leading the push to cut production, marking the third consecutive reduction for the group. Still, there is uncertainty about the extent of the cuts, as weaker members of the OPEC+ group have been hesitant to take more significant measures. Angola and Nigeria, in particular, have struggled with years of underinvestment and may be unable to meet even current production targets.
The UAE and Russia: Conflicting Interests
Another key issue that could impact the outcome of these talks is the desire of some countries to increase their production baselines. The UAE, for instance, has been pressing for higher baselines to match its growing capacity. This could potentially undermine the push towards cutting production and maintaining prices above $80 per barrel. Russia is another critical player in these deliberations, given the close relationship between the country and OPEC. There is mounting speculation that Moscow and OPEC have an alliance in place, allowing for mutual support during times of crisis. As global conflicts escalate, including the invasion of Ukraine, Russia’s stance on the issue could further complicate matters.
The Broader Economic and Political Impact
The decision of the OPEC+ group will have far-reaching implications for the global economy. With the Saudi budget depending on an oil price of $80 per barrel or more, lower prices could result in significant financial difficulties. The country’s ambitious “giga projects” are also at risk, highlighting the broader implications of the talks’ outcome. Meanwhile, the press being prevented from attending some of these meetings has raised uncertainty about the reasons for this move and the transparency of proceedings. Finally, there is the role of the US to consider. As the country seeks to mend ties with Saudi Arabia, they may weigh in on these talks. All these factors combined could greatly impact not only global oil supplies and prices but also the broader political landscape.
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The OPEC+ group was locked in talks about further cutting oil supplies on Sunday as Saudi Arabia and its allies scrambled to back the price, but hesitation from weaker African members of the group has raised the prospect that it won’t no agreement can be reached.
Saudi Arabian Energy Minister Prince Abdulaziz bin Salman Opeca de facto leader, it is expected to aim to cut up to 1 million barrels a day from the market, or about 1% of global supplies, marking the third cut the combined OPEC+ group has made since October.
But other weaker members, including Nigeria and Angola, are already struggling to meet existing production targets after years of underinvestment and are reluctant to make deeper cuts.
Nigeria wanted to raise its production target, not cut it, an OPEC delegate said. The country argued it had addressed some of the issues that had been holding back its output and was ready to pump more, the delegate said after Saturday’s meeting, adding that Angola had also opposed further cuts.
Prince Abdulaziz later called talks at his hotel with African producers including Equatorial Guinea and the Congo, without reaching an agreement.
Talks with other producers, including Russia, which helped form the enlarged OPEC+ group in 2016, could also be complicated by a desire to raise production baselines – the maximum levels of production capacity from which profits are calculated. cuts – for some members, mainly the UAE.
The UAE has long sought a higher baseline to reflect its growing production capacity and the country’s energy minister expressed confidence ahead of the meeting that OPEC+ would reach a deal.
Discussions among members continued late into the night following Saturday’s meeting of key OPEC countries, according to delegates. Broader OPEC+ talks involving Russia, Kazakhstan and Mexico are underway on Sunday.
A person close to the Saudi delegation said he believed most of the issues had been resolved before Sunday’s meeting, although about two hours after the talks began, Angola’s resources minister, Diamantino Pedro Azevedo, dropped out. the OPEC headquarters without explaining why.
OPEC Secretary General Haitham Al Ghais, the official leader of the group, accompanied Azevedo to his ministerial car and greeted him with a hug.
Saudi Arabia wants the OPEC+ alliance to cut production again to support oil prices, which have fallen to $70 a barrel in recent weeks, from over $120 a year ago.
Riyadh requires oil prices above $80 a barrel to balance its budget, according to the IMF, and to finance some of the “giga-projects” that Crown Prince Mohammed bin Salman hopes will transform its economy.
When asked about further cuts or possible changes to the maximum production levels of members, Prince Abdulaziz deviated. “You have no idea what we’re discussing,” he said ahead of Sunday’s meeting.
In a sign of growing tension between the Saudi energy minister and parts of the press, several journalists, including entire teams from Reuters and Bloomberg, were barred from attending the weekend meetings. It’s the first time that Opecthrough decades of wars, price spikes and crashes, it shut out news organizations like this.
OPEC has come under fire for its alliance with Russia following the full-scale invasion of Ukraine and for trying to prop up prices during an energy crisis triggered by Moscow’s actions.
Falling oil prices since October may have made the White House more optimistic about further production cuts, however, analysts said as the United States tries to mend ties with Saudi Arabia.
https://www.ft.com/content/05d3a7b5-b9c9-43ec-ac53-f8b7b51cbbe2
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