MOSCOW/LONDON, Nov 17 (Reuters) – The OPEC+ alliance is contemplating the possibility of implementing further cuts to oil supply in response to a nearly 20 percent decline in prices since late September, according to three OPEC+ sources reported by Reuters.
Brent crude, which reached a 2023 high near $98 in September, has retreated to approximately $79 per barrel. Despite the ongoing support from OPEC+ production cuts and geopolitical tensions in the Middle East, concerns about demand and a potential surplus in the coming year have exerted downward pressure on prices.
Saudi Arabia, Russia, and other OPEC+ members have already committed to substantial oil output reductions, amounting to 5.16 million barrels per day (bpd), equivalent to around 5% of daily global demand. These cuts include 3.66 million bpd from OPEC+ and additional voluntary reductions from Saudi Arabia and Russia.
Speaking on condition of anonymity, one OPEC+ source stated that the existing production curbs might prove insufficient, prompting the group to assess the possibility of further reductions during their upcoming meeting. Two additional sources within OPEC+ suggested that discussions about deeper cuts are on the table.
“It is not pleasant to see that market volatility is greater ahead of the next meeting while fundamentals overall remain solid,” noted one of the OPEC+ sources. “Ministers are likely to express some thoughts on what to do more, to secure a stable trend.”
Ministers from OPEC+—comprising the Organization of the Petroleum Exporting Countries (OPEC) and allies led by Russia—are scheduled to convene on Nov. 26. Although the group had already agreed to curb supplies by 3.66 million bpd until 2024 during their June meeting, the recent market conditions may prompt a reassessment of these measures.
As of now, OPEC and the Saudi Energy Ministry have not provided official comments in response to inquiries made on Friday.
Despite the reassurances in a recent OPEC monthly report that emphasized the strength of oil-market fundamentals, the price drop has persisted. The International Energy Agency, in its updated outlook, offered a lower 2024 demand growth forecast, indicating the potential for a market surplus in the first quarter.
While some sources within OPEC+ suggest the need for additional cuts, others caution that it is premature to determine whether such measures will be discussed. OPEC+ does not have a specific target for oil prices, and member countries heavily rely on oil as a primary source of government income.
Analysts, including those at Energy Aspects, have expressed concerns about the economic consequences of extending Saudi Arabia’s voluntary oil cuts, suggesting a heightened risk of economic contraction for the country this year. Saudi Arabia has consistently emphasized the importance of strong compliance with cuts to ensure a shared burden among all members.
During their last policy meeting in June, OPEC+ reached a comprehensive agreement to limit supply until 2024, with Saudi Arabia committing to a voluntary production cut of 1 million bpd for July. This voluntary cut has been extended until the end of 2023, and some analysts anticipate its continuation into at least the first quarter of 2024.