…Saudi Arabia, Russia extend oil cuts, win support from several OPEC+ partners
HIGHLIGHTS
Saudi Arabia to continue 1 million b/d cut
Russia deepens Q1 supply cut to 500,000 b/d
Next OPEC+ meeting to be held June 1, 2024
Nigeria’s OPEC production quota has been reduced to by 200,000 barrels per OPEC at it meeting which was held yesterday online by OPEC+. Angola also has its quota reduced to 1.11 million b/d, and Republic of Congo’s to 277,000 b/d.
Saudi Arabia managed Nov. 30 to bring several other OPEC+ producers into its voluntary oil supply cuts and clinch an agreement from Russia to increase its cut in the first quarter of 2024.
Voluntary cuts of 2.2 million b/d agreed upon by member countries for the first quarter of 2024 were not enough to avert a selloff, however.
Dated Brent assessed by Platts, part of S&P Global Commodity Insights, fell 2.04% to $80.6/b on Nov. 30 at close after the OPEC+ voluntary cuts were announced.
“Today’s decisions technically would tighten the first quarter balance, but the market was expecting more,” Clay Seigle, director, global oil service at Rapidan Energy Group, said.
OPEC+ said in a statement that the cuts would start Jan. 1 and last until the end of March 2024. It provided no further commentary on the decision, which follows a period of weak prices, driven by negative economic data and growing non-OPEC oil output.
Taking out the Saudi contribution, which is a rollover of its voluntary 1 million b/d cut, and Russia’s 500,000 b/d export reduction, the new curbs amount to 700,000 b/d. This figure is also inflated by the planned revision to the UAE’s baseline from 2.88 million b/d in 2023 to 3.219 million b/d for 2024, agreed in June.
The pledges came after a week of tense negotiations, and widespread skepticism that the group would agree a meaningful cut.
Saudi Arabia said Nov. 30 that it will maintain its current 1 million b/d voluntary cuts through the first quarter of 2024. Russia is extending and deepening its supply cut for the same duration.
Russian Deputy Prime Minister and lead OPEC+ negotiator Alexander Novak said Nov. 30. that Russia’s cut will increase to 500,000 b/d, including a cut of 300,000 b/d in crude supplies, and 200,000 b/d in products supplies. Russia will continue to calculate this cut from the May and June 2023 export average, he said.
“These measures will help overcome the period of low demand in the winter, and ensure the stable operation of oil markets and the balance of supply and demand,” Novak said, according to a Russian government statement.
Other members of the coalition announced cuts, including 223,000 b/d from Iraq; 163,000 b/d from the UAE; 135,000 b/d from Kuwait; 82,000 b/d from Kazakhstan; 51,000 b/d from Algeria and 42,000 b/d from Oman, OPEC said.
“Afterwards, in order to support market stability, these additional cut volumes will be returned gradually subject to market conditions,” the Saudi, Russian and OPEC statements said.
OPEC+ reaffirmed quotas under the main Declaration of Cooperation and approved Brazil joining the group from January, 2024
Country Cuts (‘000b/d)
Saudi Arabia 1000
Russia 500
Iraq 223
UAE 163
Kuwait 135
Kazakhstan 82
Algeria 51
Oman 42
Africa tension
The announcements come after days of tough negotiations on production quotas among the group, which postponed its ministerial meeting by four days. The meeting was first planned to be held Nov. 26 in Vienna, postponed until Nov. 30 for there and ultimately held virtually.
African members have seen their quotas significantly reduced, sparking anger in some quarters, even though the output impact will be limited because African members have consistently under produced in recent months.
Angola, in particular, took issue with the reduction, holding up the meeting as ministers attempted to drag the West African country over the line. Angola was still making its case for a higher OPEC quota late Nov. 30.
“Due to the fact that the decision was not taken unanimously and is against Angola’s position, we reiterate our proposal for a quota of 1.118 million barrels of crude oil for the year 2024,” oil minister Diamantino Azevedo wrote in a letter to OPEC Secretary General Haitham al-Ghais, seen by S&P Global.
Following an assessment of African production capacity by analysts from S&P Global and upstream consultancies Wood Mackenzie and Rystad Energy, Angola’s output target was reduced to 1.11 million b/d, Nigeria’s to 1.5 million b/d and Republic of Congo’s to 277,000 b/d.
That marks a reduction of 350,000 b/d, 240,000 b/d and 33,000 b/d respectively for the trio, and would constitute a production cut for Angola, which produced 1.15 million b/d in October according to the Platts OPEC Survey from S&P Global. The new quotas remain above current production for a number of other African members, including Nigeria and Congo.
African members were given five months to demonstrate higher production capacity before the November meeting to avert downgrades to quotas agreed in June, when Angola’s Azevedo left the meeting early. Some members disputed the capacity numbers, delaying the OPEC+ meeting for four days, and argued that quota cuts would hinder critical investment in their upstream sectors.
Source: S&P Global.
