A group of major oil producers known as OPEC+ announced on Sunday that it would undertake a complex production adjustment effort, including an additional cut of 1 million barrels per day, in a bid to halt the recent drop in oil prices. by Saudi Arabia.
Saudi Arabia’s cutbacks will last for a month starting in July, but could be extended.
The group, which also includes Russia and its allies, has come under pressure to strike a deal that will overturn the pessimism that has dominated oil markets in recent weeks. Oil prices have fallen about 15% over the past seven months, despite two major production cuts since October.
The resulting agreement would change production quotas in some countries, raise production levels in some countries, and lower production levels in some countries. “This is by no means a clean and simple deal,” said Richard Bronze, head of geopolitics at research firm Energy Aspects.
In a statement, OPEC+ said it was acting “to achieve and maintain stable oil markets” and continued its recent “proactive and preemptive” approach.
As far as markets are concerned, the main feature of the deal is further production cuts by Saudi Arabia. Saudi Oil Minister Prince Abdulaziz bin Salman called the move a “Saudi lollipop,” announcing it at a press conference after the meeting. meeting.
Oil officials met in Vienna over the weekend to decide how to deal with a market that has been sluggish in recent weeks. Prince Abdulaziz has been particularly vocal in warning that the group could inflate prices and cut production to stumble traders betting on lower prices.
Other producers, including Russia, are less enthusiastic about scaling back production.
Sunday’s meeting came just two months after OPEC+ announced early production cuts. Those cuts began in May, but had little time to make an impact. Analysts also said oil markets, which have plunged about 12% in prices since mid-April, have been hit hard by broader economic factors, including China’s weaker-than-expected economic growth after the end of its ‘zero-corona’ policy. also said. This could mitigate the impact of supply cuts.
After the U.S. government reached a debt ceiling deal, the international benchmark Brent oil price rose about $3 a barrel on Thursday and Friday to about $76 a barrel, but remained at $4 a barrel. That’s slightly below the level just before the rate cut last month.
Saudi Arabia’s announcement comes days before US Secretary of State Anthony Brinken is scheduled to visit the country for talks with Saudi leaders.
Saudi Arabia is the de facto leader of OPEC Plus, and under the rule of Crown Prince Abdulaziz and his half-brother Crown Prince Mohammed bin Salman, the country has become more active in its oil policy, boosting oil exports. Likes to make cuts to keep the country going. Set a floor on the price instead of letting the market run its course.
Saudi Arabia’s chief policymaker, Prince Mohammed, wants big oil revenues to fund his ambitious development plans.
OPEC has not released a price target and officials have said they are taking a long-term view, but analysts say Saudi Arabia is currently trading below $80 a barrel for Brent oil. He says he feels uncomfortable being there. OPEC+ produces more than 40% of the world’s oil supply, and if the group puts enough effort into it, it can wield significant market influence.
In the past, Saudi Arabia-led OPEC cuts have caused friction with the Biden administration, but the Biden administration has eased pressure on U.S. drivers to avoid putting the brakes on an already faltering global economy. In order to do so, we want to hold down crude oil prices.
