The Organization of the Petroleum Exporting Countries and its allies are gearing up to determine whether to extend oil supply cutbacks into the second quarter, with indications pointing towards a likely continuation of current measures.
Saudi Arabia, alongside its coalition partners, has been withholding approximately 2 million barrels of daily output to prevent an oversupply and maintain favorable prices. Riyadh has expressed confidence in the feasibility of extending these curbs, with delegates anticipating a decision in early March.
The imperative for OPEC+ to persist with supply constraints is underscored by the current state of oil markets. Despite ongoing geopolitical tensions, including recent conflicts such as the Hamas attack on Israel four months ago, oil prices have experienced a decline of about 7%. This downward trend has impacted producers’ revenues, highlighting the necessity for sustained efforts to stabilize prices.
The International Energy Agency (IEA) in Paris reports that while global demand for oil continues to show resilience, it is being offset by a surge in new supply. Should OPEC+ opt to ease existing production cuts post-March, the IEA forecasts a return to surplus in world markets.
Moreover, the coalition faces the challenge of improving adherence to production quotas, particularly in light of lackluster compliance in recent months. Both Iraq and the United Arab Emirates have exceeded their allocated quotas by several hundred thousand barrels per day, with Russia also falling short of its commitments. This lax enforcement, coupled with signs of resurgent activity in America’s oil-producing regions, serves as a reminder of the importance of maintaining discipline within the cartel.
While OPEC+ may interpret the resurgence of shale oil production as a threat to their efforts, recent developments suggest a commitment to exercising restraint. Saudi Aramco’s decision to cancel a planned expansion of output capacity, slated for 2027, suggests a preference for tighter control over supplies in the foreseeable future.
In other news:
European oil companies such as TotalEnergies SE continue to prioritize shareholder returns, with TotalEnergies raising dividends and initiating share buybacks despite lower profits. Equinor ASA follows suit.
Orsted A/S announces suspension of dividends until at least 2025 and scaling back of new projects in the wind energy sector, while Vestas Wind Systems A/S sees positive developments.
The seizure of a Libyan tanker off Albania sheds light on a $5 billion trade in smuggled fuel, much of which originates from Russia.
Talks between Woodside Energy Group Ltd. and Santos Ltd. for a potential tie-up conclude without an agreement, leaving Santos under pressure to explore alternatives to enhance its valuation.
De Beers CEO Al Cook anticipates a slow and gradual recovery in the diamond sector amid subdued economic growth in key markets like China and the US.
Additional Updates:
Research published in the PNAS journal indicates that with a 2°C rise in global temperatures, the risk of stronger storms, potentially reaching a hypothetical Category 6, would double in the Gulf of Mexico.
The White House’s decision to halt approvals of liquefied natural gas (LNG) terminals sparks a debate over the environmental impact of LNG compared to coal.
H2 View examines the role of carbon capture in addressing the significant emissions associated with current hydrogen production, amidst growing interest in hydrogen’s decarbonization potential.