• Sunday, February 25, 2024
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OPEC+ faces growing pressure to cut production

Rising oil output from Nigeria raised OPEC’s June production

The Organisation of Petroleum Exporting Countries (OPEC) cartel led by Saudi Arabia and allied producers including Russia will try to agree Thursday on cuts to the amount of crude they send to the world, with prices having tumbled lately despite their efforts to prop them up.

Analysts said this development is bad news for OPEC+ countries whose oil income props up their economies and who have faced setbacks in keeping prices up despite initial fears that the Israel-Hamas war could affect oil flows.

Now, they are struggling to come to a consensus on production cuts, analysts say, on the same day the U.N. climate conference kicks off in the United Arab Emirates, an OPEC member.

The group postponed its meeting originally set for Sunday by four days, indicating that a new agreement will prove to be challenging, said Jorge Leon, senior vice president of oil market research for Rystad Energy.

“Despite the challenges, we still expect OPEC+ to reach an agreement to reduce production,” he said in an analyst note. That’s because “every member country acknowledges the need to reduce output to support prices into 2024.”

The question is how to split it among the 23 member countries, some of whom already accepted lower production targets at the last OPEC+ meeting in Vienna in June.

Another big question is whether Saudi Arabia and Russia will extend their additional voluntary cuts of 1 million barrels per day and 300,000 barrels per day, respectively, into 2024.

Russia wants more oil revenue as it faces Western sanctions but seeks to pour energy earnings into its war chest against Ukraine. The Saudis have to earn nearly $86 per barrel to meet their planned spending goals, according to the latest estimate from the International Monetary Fund.

Read also: Nigeria’s stubborn push for higher OPEC quota leaves cartel leaders scrambling

The Saudis are trying to fund an ambitious overhaul of the kingdom’s economy, reduce its dependence on oil and create jobs for a young population.

But the international benchmark Brent crude has stayed in the low- to mid-$80 range in recent weeks, reflecting concerns about oversupply in a weakening global economy, which could weigh on the thirst for oil for travel and industry.

Early Thursday, Brent, the benchmark of Nigeria’s crude oil rose 8 cents to $82.96 a barrel, while U.S. crude rose by 11 cents to $77.97 a barrel in electronic trading on the New York Mercantile Exchange.