[1/3] Photo of the Saudi Minister of Energy, prince Abdulaziz bin Salman Al-Saud, arrives for an OPEC meeting in Vienna. /Photo prize on June 4, 2023 à Vienne, Autriche/REUTERS/Leonhard Foeger
VIENNA, June 4 (Reuters) – Saudi Arabia will pledge new voluntary production cuts as part of a wider OPEC+ deal to curb output, sources told Reuters, as the group faces flagging of oil prices and a looming supply glut.
The group, known as OPEC+, reached a deal on output policy after seven hours of talks, the sources said.
Two OPEC+ sources said the group is likely to maintain an existing output agreement for 2023 and make further cuts in 2024 if the new production baselines for members, where the cuts are made, was agreed upon.
It’s unclear when Saudi will begin making its voluntary cuts or how much Riyadh and OPEC+ will cut overall.
OPEC+, which groups the Organization of the Petroleum Exporting Countries and allies led by Russia, pumps about 40% of the world’s crude, meaning its policy decisions can have a major impact on oil price.
Since Friday’s OPEC+ meeting, sources told Reuters that additional production cuts could reach 1 million barrels per day on top of existing cuts of 2 million bpd and voluntary cuts of 1.6 million bpd, announced in a surprise move in April and took effect in May .
The announcement in April helped drive oil prices about $9 a barrel higher above $87, but they quickly retreated under pressure from concerns about global growth and demand. On Friday, the international benchmark Brent settled at $76.
If approved, a new cut would take the total volume cuts to 4.66 million bpd, or about 4.5% of global demand.
Normally, production cuts take effect the month after they are agreed but ministers can also agree to implementation at a later date.
Last week, Saudi Arabia’s Energy Minister Prince Abdulaziz said that investors shorting oil prices, or betting on falling prices, should “be careful”, which many observers interpreted as to the market as a warning of further supply cuts.
Western countries have accused OPEC of manipulating oil prices and undermining the global economy through high energy costs. The West has also accused OPEC of siding with Russia despite Western sanctions over Moscow’s invasion of Ukraine.
In response, OPEC insiders said Western money printing over the past decade had fueled inflation and forced oil-producing nations to act to maintain the value of their key export.
Asian countries, such as China and India, buy the largest share of Russian oil exports and refuse to join Western sanctions on Russia.
At Sunday’s meeting, OPEC’s most influential members and biggest Gulf producers led by Saudi Arabia sought to persuade low-producing African countries such as Nigeria and Angola to have more realistic output targets, sources said.
Nigeria and Angola have long been unable to meet their targets but have opposed lower baselines because new targets could force them to make real cuts.
In contrast, the United Arab Emirates has asked for a higher baseline in line with its growing production capacity, but that could mean its share of the total cuts could drop.
OPEC denied media access to its headquarters to reporters from Reuters and other news media.
Reporting by Ahmad Ghaddar, Alex Lawler, Maha El Dahan and Julia Payne; Writing by Dmitry Zhdannikov; Editing by Hugh Lawson, Emelia Sithole-Matarise and Barbara Lewis
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