VIENNA: There are increasing indications that the world’s top oil producers, led by Saudi Arabia and Russia, may decide to significantly reduce output when they meet on Sunday to support oil prices.
The Organisation of the Petroleum Exporting Countries (OPEC), which has 13 members, will examine its future output strategy in consultation with 10 other oil-producing countries, including Russia.
According to AFP, the OPEC+ meetings will be held in person starting at 8:00 GMT on Sunday in Vienna.
Analysts had anticipated OPEC+ producers to stick with their present course, but signals on Saturday suggested that this may not be enough to stabilise the oil market.
A number of OPEC+ countries decided to voluntarily reduce their production in April by about one million barrels per day (bpd). This unexpected action temporarily supported prices but did not result in a long-term recovery.
Due to the Russian invasion of Ukraine, which has disrupted businesses all over the world, oil producers are struggling with dropping prices and increased market volatility.
As they arrived in the Austrian capital for their talks on Saturday, the majority of delegations either stayed silent or refrained to comment on potential policy decisions.
Analysts disagreed on whether powerhouses Moscow and Riyadh will maintain the group’s present output policy or significantly reduce output.
One of the ideas being explored, a person familiar with the conversations told AFP, was a reduction in output of 700,000 to one million bpd. However, the source stressed that nothing was final.
Iran’s OPEC governor Amir Hossein Zamaninia told AFP on Saturday that “there was no discussion of production volume today,” but added that all possibilities were still “on the table” for the meeting on Sunday.
Recession fears
Oil prices have plummeted by about 10 per cent since the April cuts were announced, with Brent crude falling close to $70 a barrel, a level it has not traded below since December 2021.
Traders worry that demand will fall, with concerns about the global economy’s health as the United States fights inflation with higher interest rates and China’s post-Covid rebound stutters.
After arrival in Vienna, where OPEC is headquartered, Emirati energy minister Suhail Mohamed Al Mazrouei said that he expected the outcome of Sunday’s ministerial meeting to “balance the market and ensure they were ready for any challenges in the future”.
Amid fears of economic slowdown, “the probability of a new production cut being announced has considerably increased, ” UBS analyst Giovanni Staunovo told AFP that he still believed OPEC+ would decide on a rollover.
However, Yousef Alshammari of CMarkits said that he expected Saudi Arabia “to push for a cut of at least half a million bpd”.
‘United front’
It remains to be seen whether Riyadh would convince Moscow to further cut output, as Russia depends on oil revenues with its war in Ukraine dragging on and Western sanctions hitting its economy.
Russia’s Deputy Prime Minister Alexander Novak “sees no need for OPEC+ to change course” because it would hardly benefit from higher prices, Commerzbank commodity analysts said in a research note.
Russia had been shipping its oil to India and China as the Asian giants soaked up the cheap crude.
