In the recent OPEC+ meeting held virtually in November, key decisions were made to address oil supply concerns, making this gathering particularly impactful for oil markets. While no new group reduction targets for the upcoming year were officially announced, several member countries opted for voluntary cuts. Combined with the continued reductions by major players Saudi Arabia and Russia, these voluntary measures amount to approximately 2.2 million barrels per day.
Voluntary Cuts by Key Players in Q1 2024
Saudi Arabia, a major oil producer, took the lead in voluntary cuts for the first quarter, committing to maintaining its 1 million barrels per day reduction. Other countries followed suit, with Iraq implementing a cut of 223,000 barrels per day, the UAE reducing by 163,000 barrels, Kuwait by 135,000 barrels, Kazakhstan by 82,000 barrels, and Algeria by 51,000 barrels. Additionally, Oman pledged to cut 42,000 barrels per day, while Russia continued its 500,000 barrels per day reduction, involving both refined products and crude oil.
Market Response and Brent Crude Prices
Following the meeting, Brent crude oil prices experienced a modest increase of 0.30%, reaching $80.6 (€73.80) per barrel on Friday morning. It’s noteworthy that the market had already factored in these cuts, and there were even expectations of more substantial reductions. The OPEC+ committee also extended an invitation to Brazil to join its ranks, with the country potentially becoming a member in January.
Challenges and Disagreements Within the Committee
The OPEC+ committee faced disagreements and challenges leading up to this meeting, causing a delay from November 26 to November 30. Quota disagreements sparked discussions about a potential split within the committee. African producers, including Angola, Nigeria, and the Republic of Congo, expressed concerns about further cuts as each member seeks to secure the highest possible production quota.
Significance of OPEC+: Global Oil Supply Regulation
The decisions made by OPEC+ hold significant importance as they regulate global oil supply, impacting oil prices. With control over 60% of international petroleum trade and 80% of known oil reserves, the committee wields considerable influence over oil markets. The recent cuts, particularly Saudi Arabia’s commitment to extend its reduction into Q1 2024, exemplify the committee’s efforts to stabilize oil prices.
Future Considerations: Geopolitical Factors and Oil Demand
Looking ahead, geopolitical factors like the Russia-Ukraine war and the Israel-Hamas conflict remain pivotal in determining oil demand. Ongoing global transitions towards clean energy sources and the impact of key geopolitical events could shape oil demand in 2024. While an agreement was reached with dissenting African producers for the November meeting, the committee faces potential disagreements that could escalate, especially in the context of evolving global energy demands.
SOURCE: Ref Image from CNBC
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