Just two months after shocking markets by announcing oil production cuts, OPEC, Russian and other officials, who meet in Vienna this weekend, are wondering whether they need to cut production again. I noticed
Their goal would be to prop up a market that has turned negative. Oil prices have fallen more than 12% since mid-April, with Brent crude at around $76 a barrel and West Texas Intermediate crude at $71.70.
The main reason for the downturn is persistent fears of a slowing global economy, which has sparked concerns among investors and traders about falling demand for oil and other commodities.
“They are facing a stubborn bear market,” said Rad Alkadiri, managing director of energy, climate and resources at political risk firm Eurasia Group.
But some analysts say producer groups are likely to be reluctant to adjust production as it could be premature and counterproductive.
Analysts at research firm Energy Aspects said on Thursday that broader macroeconomic concerns “have driven most of the recent oil price declines, with key OPEC+ leaders optimistic that further production cuts would halt this sort of move. I understand it’s unlikely,” he said.
Prince Abdulaziz bin Salman, Saudi Arabia’s oil minister and co-chair of OPEC+ this weekend, will cut more oil production to punish those he calls “speculators” betting on lower prices. suggested that it could be reduced.
“I just want to tell them to be careful,” he said at a recent conference in Qatar.
Prince Abdulaziz adjusted the cuts announced on April 2, but the shock to oil prices quickly wore off. Brent is now selling for about 4% less than it did on the eve of the April decision.
Falling oil prices will make gasoline more affordable. But Gary Ross, chief executive of trading and investment firm Black Gold Investors, said people buying and selling oil around the world were “very nervous” for a variety of reasons, including economic uncertainty. rice field.
Traders also fear that relations between Saudi Arabia and Russia will never be easy and tensions will rise, making it difficult for the Organization of the Petroleum Exporting Countries and OPEC+, which unites Russia and its allies, to agree on how to manage markets. are doing. .
Market uncertainty is a problem for Prince Abdulaziz. Analysts say the Saudi government of Crown Prince Mohammed bin Salman wants to sell crude at more than $80 a barrel to finance the state budget and ambitious development plans.
Some analysts believe the price decline could turn around in the coming months. The International Energy Agency recently raised its forecast for global oil demand growth this year by 10% to 2.2 million barrels per day, saying demand will outstrip supply. He said the recovery in Chinese consumption was “even stronger than previously expected.”
Analysts say some OPEC+ leaders are waiting for the 1 million barrels per day (bpd) reduction announced in April to trickle down through the system. Some people say they want to. These cuts will begin in May and will take time to affect the market.
To finance the war in Ukraine, Russia may be reluctant to cut oil exports. Western countries have capped Russian crude at $60 a barrel, and the country’s exports hit 8.3 million barrels a day in April, the highest level since the invasion of Ukraine, according to the International Energy Agency. . These exports were the result of Russia expanding oil sales to India and China following a ban by the European Union and other Western countries.
However, such expanded sales to India could create a point of contention heading into the meeting. Saudi Arabia and the United Arab Emirates, another major Middle East oil producer, have seen their share of the Indian oil market dwindle as Indian refiners buy Russian crude at discounted prices. I am witnessing. .
Another risk is that potential cuts will again be ignored by the market, further eroding confidence.
“The ultimate danger is that the cutback announcement will be interpreted as a sign of desperation,” said Richard Bronze, head of geopolitics at Energy Aspects.
In an unusual move, OPEC refused invitations to journalists from around the world. bloomberg news and Reuters to attend meetings; Two Wall Street Journal OPEC reporters were also excluded, but other Journal reporters received invitations. The New York Times received the invitation.
The move is widely believed to be an effort by Saudi Arabia to cover up critical reporting. Prince Abdulaziz has previously criticized media coverage of the group. The press is expected to continue covering the meeting, and reporters barred from OPEC headquarters will still be able to interview officials outside the meeting.
An OPEC spokesman declined to comment.
“It’s a shame Reuters was not invited,” said a Reuters representative. Bloomberg News declined to comment. The Wall Street Journal could not be reached for comment.
Vivian Nellaim Contributed to the report.
