Brazil’s entry into OPEC+ is the real surprise that emerged from the summit of oil producers, which from January will therefore expand participation to 24 countries. As for the cuts, the market was disappointed: throughout the day there had been rumors of a “preliminary” agreement on a major squeeze, of one million barrels a day or even two, but in the statement released at the end of the meeting there is no mention of it. So prices reversed course and Brent, which had exceeded 84 dollars a barrel, fell back to below 83 dollars.
The additional production cut will eventually happen. But it was announced in no particular order only by some countries and only for the first quarter of 2024. It took a second statement (from the OPEC secretariat and not from OPEC+) to summarize them, noting that they amount to «2.2 million barrels per day”, by eight countries. However, the figure is somewhat theoretical and brings together a bit of everything. There are extra voluntary contributions promised by Iraq (-223 thousand bd), United Arab Emirates (-163 thousand), Kuwait (-135 thousand), Kazakhstan (-82 thousand), Algeria (-51 thousand) and Oman (-42 thousand). There is Russia, which promises to increase its “voluntary” cut from 300 to 500 thousand bg, but counting both crude oil and refined products. And on the part of Saudi Arabia there is yet another extension, until March, of the additional 1 mbd cut that Riyadh had offered at the summit last June, calling it a “lollipop”. The hope at the time was to mollify coalition allies. But they still seem reluctant to collaborate.
Yesterday’s summit was postponed for 4 days to allow time for negotiations. And it had migrated to the web, rather than taking place in Vienna, to facilitate confidentiality and perhaps better conceal discontent. However, Riyadh was unable to obtain unanimous consent from OPEC+ for cuts that it would have liked to be not only more incisive but also redistributed more equitably.
The summit was also a failure in terms of the dispute with African countries: Angola “will produce more than the quota determined by OPEC”, declared governor Estevao Pedro only a few hours after the group’s statement, which cited a quotas of 1.11 mbd for Luanda, 1.5 mbd for Nigeria and 0.277 mbd for Congo, suggesting that the issue had been resolved. «It is not a question of disobeying OPEC – insisted Pedro – We have presented our position and OPEC should take it into account».
The tug of war will continue, we can bet, at least until the next summit, set for June 1st at the OPEC headquarters in Vienna.
2023-11-30 19:57:05
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