Global investors, particularly in Europe, are eagerly anticipating the November OPEC+ meeting. This meeting holds great significance as it will provide insights into the future actions of major oil-producing countries. Scheduled for Thursday, November 30th, its outcome has the potential to shape oil markets not only on the continent but also worldwide.
Understanding OPEC+ and Expectations for the November Meeting
OPEC+, consisting of the original Organization of Petroleum Exporting Countries (OPEC) members and their allies, comprises major oil-producing countries. The original members include the United Arab Emirates, Iraq, Iran, Kuwait, Saudi Arabia, Venezuela, Algeria, Angola, Gabon, Nigeria, Libya, Republic of Congo, and Equatorial Guinea. On the other hand, Russia, Kazakhstan, Bahrain, Brunei, Malaysia, Azerbaijan, Mexico, Sudan, South Sudan, and Oman are non-OPEC countries or allies. The November meeting is likely to focus on maintaining current supply cuts or potentially implementing even deeper crude output reductions due to the recent decrease in Brent crude oil prices.
Internal Disagreements and African Producers’ Quota Issues
Disagreements among OPEC+ members have caused delays in this month’s meeting, with some considering a split over quota differences. African producers, including Angola, Nigeria, and the Republic of Congo, are particularly affected by further supply cuts. Each country is assigned a production quota by the OPEC+ committee, and securing higher quotas is essential for their interests. Nigeria and Angola, despite efforts to increase production, may struggle to meet the proposed 2024 quota plan. As a result, these three countries are under review by OPEC+ to assess their production capacities, with the assistance of hiring firms such as IHS, Wood Mackenzie, and Rystad Energy.
The Significance of OPEC+ Decisions on Oil Markets
OPEC+ decisions carry immense importance as they regulate global oil supply, thereby influencing oil prices. Controlling 60% of international petroleum trade and holding 80% of known oil reserves, the committee wields substantial influence over oil markets. During periods of weak demand and falling prices, OPEC+ may opt to reduce production to support oil prices. Notably, Saudi Arabia previously volunteered a reduction of 1 million barrels per day in June, with Russia following suit with a reduction of 300,000 barrels per day. The upcoming meeting will determine whether Russia continues, deepens, or increases its output cuts. However, geopolitical factors such as the Russia-Ukraine war and the Israel-Hamas conflict also contribute to oil market dynamics.
Future Trends and Possible Challenges for Oil Markets
Oil markets in 2024 face various challenges, including weak demand in the first quarter and the growing shift towards clean energy sources. Factors like the ongoing Russia-Ukraine conflict and the Israel-Hamas dispute further impact oil demand due to possible price shocks and supply chain disruptions. While disagreements within OPEC+ have been temporarily resolved, potential disagreements in the future, especially if global oil demand remains subdued, could lead to more significant disputes or even a split within the committee.
SOURCE: Ref Image from CNBC
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