OPEC+ meets to debate production quotas; weighs in fresh output cuts to boost oil prices
OPEC+ pumps around 40 per cent of the world's crude, meaning its policy decisions can have a major impact on oil prices.
PremiumThe Organization of the Petroleum Exporting Countries and its allies, or OPEC+ met in Vienna on June 4 to consider more oil production cuts in a bid to bolster oil prices. The 13-member OPEC led by Saudi Arabia is consulting with 10 other oil majors, including Russia, to review the grouping's future output policy.
Analysts had largely expected OPEC producers to maintain their current policy, but signs emerged this weekend that the 23 countries may make deeper cuts. An output cut of one million barrels per day (bpd) was one of the options being discussed, according to a report by news agency Reuters.
Also Read: Oil settled higher on US debt bill approval after week-long volatility; all eyes on OPEC+
In April, several OPEC members agreed to voluntarily cut production by more than one million bpd -- a surprise move that briefly shored up prices but failed to bring about lasting recovery.
If approved, the oil output cuts of 1 million bpd on top of the existing cuts of 2 million bpd and April's voluntary cuts of 1.6 million bpd, would take the total volume of reductions to 4.66 million bpd, or around 4.5 per cent of the global demand. Further reductions in OPEC+ oil output would prove to be bullish for crude prices.
OPEC+ pumps around 40 per cent of the world's crude, meaning its policy decisions can have a major impact on oil prices. Typically, production cuts take effect the month after they are agreed but ministers could also agree a later implementation. They could also decide to hold the output steady.
Analysts are divided over whether heavyweights Saudi Arabia and Russia will keep the group on course with its current output policy, or further curtail production. All options remain ‘on the table’, Iran's OPEC governor Amir Hossein Zamaninia told news agency AFP on Saturday.
Oil prices have plummeted 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 slump, with concerns about the health of the global economy as the US battles inflation and higher interest rates while China's post-Covid rebound stutters.
Earlier, the International Energy Agency (IEA) raised its forecast for global oil demand by 200,000 bpd to 102 million bpd, noting that China's recovery after the lifting of COVID-19 curbs had surpassed expectations with demand reaching a record 16 million bpd in March.
"The current market pessimism stands in stark contrast to the tighter market balances we anticipate in the second half of the year, when demand is expected to eclipse supply by almost 2 million bpd,'' said the Paris-based agency gathering of the 31 mostly industrialised countries and much of the European Union (EU).
Last month, Saudi Arabia's Energy Minister Prince Abdulaziz said investors who were shorting the oil price, or betting on a price fall, should "watch out", which many market watchers interpreted as a warning of additional supply cuts.
On the other hand, Russia's Deputy Prime Minister Alexander Novak said that he "sees no need for OPEC to change course" because it would hardly benefit from higher prices. Since Western sanctions hit Moscow over Ukraine, Russia has been shipping oil to India and China as the Asian giants snapped up the cheap crude.
"Exciting news! Mint is now on WhatsApp Channels 🚀 Subscribe today by clicking the link and stay updated with the latest financial insights!" Click here!
