Voluntary production cuts failed to stop oil prices from falling. Saudi Arabia and Russia are pushing OPEC+ to reach a “collective agreement” – Mobile Finance

Voluntary production cuts fail to stop falling oil prices, Saudi Arabia and Russia are pushing OPEC+ to reach a “collective agreement”

Zhao Hao, Financial Associated Press

2023-12-07 23:34:51

Financial News Agency, December 7 (Editor Zhao Hao) According to media reports on Thursday (December 7), Saudi Arabia and Russia, the two largest oil producers in OPEC+, are calling on other member countries to join the production reduction agreement. Last week, the organization failed to reach a “collective production reduction” agreement, causing international oil prices to fall significantly.

On the same day, Russian President Vladimir Putin arrived in Riyadh, the capital of Saudi Arabia, and held talks with Saudi Crown Prince and Prime Minister Mohammed bin Salman. The latest joint statement stated that the two countries have reached an agreement on expanding cooperation in the oil and natural gas field in the future.

“The two sides praised each other for their close cooperation in the energy sector and the efforts of OPEC+ members in strengthening the stability of global oil markets,” a Russian-language statement released by the Kremlin read.

The statement added, “Both countries emphasized the importance of continuing this cooperation and the need for all participating countries to join the OPEC+ agreement, as this approach not only serves the interests of oil producers and consumers, but also supports the global economic growth.”

A report from the Saudi Arabian State News Agency (SPA) also mentioned that the Saudi Crown Prince emphasized the need for member states to comply with the OPEC+ agreement during the meeting. Oil market sources said clear public comments from Russia and Saudi Arabia about “joining” the production cuts appeared to be cues aimed at specific oil majors.

Previously, the OPEC+ conference rarely postponed the meeting by four days, and then further changed the postponed meeting to be held online. Some oil traders said they suspected a deeper schism within the group.

The results of the meeting showed that many oil-producing countries announced that they would continue to voluntarily reduce production in the first quarter of next year, with the total production reduction averaging 2.2 million barrels per day. Among them, Saudi Arabia extended its voluntary production cut of 1 million barrels per day starting in July this year until the end of March next year, and Russia also increased its voluntary daily production cut of 300,000 barrels starting in September to 500,000 barrels per day.

However, analysis pointed out that OPEC+ announced a “voluntary production reduction” rather than a “collective production reduction”, which reflected its internal differences and raised questions about whether member states will follow up and implement production reductions. Yesterday, international oil prices recorded their fifth consecutive daily decline, with U.S. oil falling directly below the $70 mark.

Currently, both the Saudi and Russian governments need a higher oil price, and this demand is more urgent than ever before, and both hope that the other party can make more sacrifices in production.

Previously, Saudi Arabia has implemented voluntary production cuts of 1 million barrels per day. If it expands production cuts alone, it may have a deeper impact on the country’s energy revenue.