Tough debate in OPEC+ on whether to further cut oil production to support prices

Alliance Ministers OPEC+ engaged in tough negotiations this Sunday in Vienna to stop the fall of the oil pricesand the possibility of a new production cut.

The thirteen members of the Organization of the Petroleum Exporting Countries (OPEC), led by Saudi Arabia and which includes Venezuela, and the group of its ten partners, led by Russia, seek an agreement on the policy of this alliance.

The meeting at OPEC headquarters began almost three hours later than expected and a 1 million barrels per day cut is on the table, a source close to the negotiations said.

The outcome of the meeting is uncertain and the first technical meeting ended without any recommendation, the same source said.

According to the Bloomberg agency, the United Arab Emirates, which advocates greater production, defends increasing the base on which its pumping quota is calculated.

This measure would be taken to the detriment of some African countries, which for political reasons are reluctant to adjust their base, despite barely meeting their production targets.

The fear of a recession

Upon arrival at OPEC headquarters this Sunday, the group’s ministers adopted the silence that characterizes the leaders of this pact.

The Saudi representative, Energy Minister Abdel Aziz bin Salmán, avoided answering questions from the crowd of journalists gathered at the OPEC entrance. The Russian vice prime minister, in charge of the Energy portfolio, Alexander Novak, did not speak to the press either.

Delegates are meeting in a climate of uncertainty about the global economy, with several negative economic indicators for crude oil demand.

“Everything is on the table”Iran’s representative to the organization, Amir Hosein Zamaninia, told reporters on Saturday.

The decision to regulate the supply with a cut in production to prop up prices faces resistance from countries that advocate maintaining the quotas because they need more oil revenue.

Despite the fact that oil prices rebounded in the last two days, prices have fallen 10% since several OPEC+ members announced a surprise cut in their production of more than one million barrels per day in early April.

This reduction in production came up against a market threatened by the impact of inflation, the monetary tightening of the large banks, a less fluid than expected recovery in Chinese demand and various turbulences that affected the financial system.

Brent, which is the reference in Europe, is at 76 dollars a barrel and the US marker WTI is trading at 71 dollars, very far from the levels reached in March 2022 at the start of the war in Ukraine, when they reached close to $140 a barrel.

Giovanni Staunovo, an analyst at UBS, indicated that “it seems that the possibilities (of a new production cut) have increased considerably”citing the weakening of various economic indicators and “fears of a recession”.

Yousef Alshammari, head of market research at CMarkits, believes “That most likely there will be a cut.” “I would expect the kingdom of Saudi Arabia to push for a cut of at least half a million barrels.” project.

“A united front”

The meeting will reveal whether Saudi Arabia manages to convince Russia, which is the other unifying pillar of the group, to turn off the oil tap, which provides Moscow with income to finance its military offensive.

Novak, told the Russian newspaper Izvestia at the end of May: “I don’t think there are any new changes.”

Due to sanctions by Western powers, Russian crude can only be traded at a price of $60 or less.

“In contrast, Saudi Arabia needs higher prices to balance its budget”Commerzbank analyst Barbara Lambrecht said in a note.

But, “Despite the current conflicts of interest, the two main producers of the cartel are going to apply themselves to maintain the unity of the group, which has more power thanks to the united front they are showing,” Lambrecht stated.

Source: AFP