OPEC+ members in Vienna have agreed to extend crude production cuts into 2024.
In a statement, the cartel said that it was acting ” to achieve and sustain a stable oil market,” and that it was continuing its recent approach of being “proactive, and pre-emptive.”
Additionally, Saudi Arabia committed to an additional voluntary cut of 1 million barrels per day as part of this agreement, adding that they “will do whatever is necessary” to stabilize the oil market.
Russia will extend its voluntary oil production cut of 500,000 barrels per day until the end of December 2024, Reuters reported, citing Russian Deputy Prime Minister.
The main winner from the weekend’s talks is the United Arab Emirates, which gets a boost to its quota for next year. UAE Energy Minister Suhail Al Mazrouei thanked his colleagues for the hike to its quota and expressed the country’s loyalty to the cartel.
“We will always support OPEC and will always stay together,” he said.
That comes at the expense of African members who were asked to give up part of their unused quota.
While they’ve been falling short of their targets, it’s still a bitter political pill for them to swallow. That’s why talks dragged on so long, including some late night sessions in Vienna hotels.
Bloomberg, Reuters and the Wall Street Journal have been barred from attending the headquarters for the meeting. Reporters continue to interview delegates on the sidelines.
Secretary General Haitham Al Ghais said lots of journalists had been invited and defended the organization’s policy.
“This is our house,” he told reporters. “OPEC has always had an open policy, transparent.”
The next OPEC+ meeting will take place in Vienna on Nov. 26.
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Oil prices were trading up on Friday afternoon as shorts got a little nervous heading into the OPEC+ weekend, with new rumors circulating about the group’s discussions about another 1 million bpd in production cuts.
The OPEC+ group is scheduled for three separate meetings beginning this weekend and concluding on June 4.
While the general sentiment has been that the group will keep the status quo as far as production targets are concerned. But Saudi Arabia’s Energy Minister has made boisterous threats against oil’s speculators in the runup to the meeting, saying that shorts will be “ouching”.
On Thursday, Reuters suggested that the OPEC+ group would be unlikely to deepen its production targets at the meeting this weekend.
But late on Friday, Reuters suggested that OPEC+ was indeed discussing an additional output cut of around 1 million barrels “among possible options” for the meeting on June 4.
“Everything is on the table,” Iran’s OPEC Governor Amir Zamaninia told reporters in the Austrian capital.
Crude oil prices were already trading up ahead of the meeting, but increased even more in the afternoon hours, bringing Brent crude to $76.32 at 4:20 p.m., a $2.06 per barrel increase on the day. WTI was trading at $71.90 per barrel at that time.
A supply reduction of as much as 1 million barrels a day is the most likely outcome, according to RBC’s Chief Commodities Strategist Helima Croft.
“We think that the continued macro worries and soured sentiment will lead the group to make another downward adjustment,” she said in a note.
But Saudi Arabia appears to still be in control of OPEC+, and The Kingdom could decide to make good on his threats to punish short sellers for their speculative trades that fly in the face of market fundamentals.
“I keep advising them (referencing oil speculators) that they will be ouching, they did ouch in April, I don’t have to show my cards. I am not a poker player…but I would just tell them watch out,” Saudi’s energy minister said late last month in the runup to the meeting.
As a reminder for why there could be some “ouching”. Bloomberg shows, the trading positions of hedge funds and other non-commercial traders are at the most bearish levels since at least 2011 across a combination of all major oil contracts…
Finally, while hedge funds are betting that OPEC is quietly overproducing and exporting much more than their recent quota permits, a recent update by Goldman Sachs shows that bears may be in for a very rude awakening, as seaborne net exports by OPEC countries which announced a cut in April have finally tumbled by over 1mmb/d over the past 2 weeks.
OPEC+ has suggested with its latest moves that its sweet price spot is around $80-90 per barrel, so it is trying to keep prices around that level.