(Vienna) Saudi Arabia, OPEC heavyweight, decided on Sunday to make a new production cut in the hope of raising oil prices at half mast, in an economic context clouded by the war in Ukraine .
This voluntary reduction of around one million barrels per day applies from July and may be extended, Prince Abdelaziz bin Salman said after an OPEC meeting in Vienna ( the thirteen members of the Organization of the Petroleum Exporting Countries and their ten allies led by Russia).
In front of the press, the Saudi Minister of Energy congratulated himself for having spared “the suspense” with this measure which he described as a “Saudi treat”, “icing on the cake” to “bring stability back to an extremely volatile market.
In addition, the reductions introduced since the beginning of May by nine countries, including Riyadh, Moscow, Baghdad and Dubai, for a total of 1.6 million barrels daily, “are extended until the end of 2024”, specified to the out Russian Deputy Prime Minister Alexander Novak.
The negotiations lasted several hours, with the Bloomberg agency reporting differences between the 23 participants, who represent 60% of the world’s black gold production.
After difficult discussions, the United Arab Emirates, eager to pump more, obtained an increase in its crude production quota for 2024, according to the new table published by OPEC.
On the other hand, Angola, Congo and Nigeria in particular, reluctant at first, have seen their targets lowered, which they are struggling to achieve.
“We managed to come to an agreement,” said Bruno Jean-Richard Itoua, Congolese Minister of Hydrocarbons. “We’re very happy,” he insisted.
Riyadh’s gesture comes as prices have fallen in recent months despite the unexpected announcement in early April of drastic cuts.
This strategy has effectively failed to lift prices in a market depressed by fears of a global economic recession, rate hikes by major central banks and the slow recovery of demand in China from the anti-COVID-19 restrictions.
Brent, Europe’s crude benchmark, is currently trading at $76 a barrel, and its US equivalent, WTI, at $71 – far from the highs recorded in March 2022 at the start of the conflict in Ukraine (nearly $140). .
As signs of discord between Riyadh and Moscow threatened to disrupt the meeting, “OPEC displayed a united front,” UBS analyst Giovanni Staunovo told AFP. “They obviously have divergent views, but they’ve demonstrated that they know how to work together.”
“We haven’t had any disagreements. This is a joint decision made in the interest of the market,” Mr. Novak assured.
Despite its commitments, Russia is reluctant to further tighten the floodgates of black gold – windfall it is using to finance its military offensive against Ukraine.
In addition, Moscow would hardly benefit from higher prices. Due to Western sanctions, only Russian oil priced at or below $60 can continue to be delivered. Beyond this ceiling, companies are prohibited from providing services allowing maritime transport (freight, insurance, etc.).
“On the other hand, Saudi Arabia needs higher prices to balance its budget,” says Barbara Lambrecht of Commerzbank, who cites a breakeven point around $80 a barrel.
After Riyadh’s announcement, analysts expect “a positive market reaction”, according to Tamas Varga of PVM Energy. In the longer term, however, “a decline in demand under inflationary pressure could undo the effect of this decrease in supply,” she warns.
The alliance has already warned that it will convene an emergency meeting “if necessary”. For now, the next meeting in the Austrian capital has been set for November 26.
