2023-12-01 08:14:36
Oil prices fell in early trading – today, Friday – to continue the losses that began following producers in the OPEC Plus alliance agreed to voluntary reductions in crude production in the first quarter of next year, which were reductions that fell below market expectations.
Brent crude futures for February fell 0.4% to $80.5 per barrel by 7:34 GMT, and US West Texas Intermediate crude futures also fell 0.3% to $75.7.
Saudi Arabia, Russia and other members of the OPEC Plus group – which pump more than 40% of global oil – agreed to voluntary production cuts exceeding two million barrels per day in the first quarter of 2024.
However, at least 1.3 million barrels per day of these cuts come from extending voluntary cuts already implemented by Saudi Arabia and Russia.
Delegates said earlier that a discussion was underway regarding new additional cuts of up to two million barrels per day.
The OPEC Plus production – which consists of the Organization of the Petroleum Exporting Countries (OPEC) and allies including Russia – of regarding 43 million barrels per day actually reflects reductions of regarding 5 million barrels per day, with the aim of supporting prices and achieving market stability.
Details of discounts
OPEC said in a statement following the meeting that the total cuts amount to 2.2 million barrels per day from 8 producers.
This figure includes an extension of the Saudi and Russian voluntary cuts of 1.3 million barrels per day.
The additional reductions of 900,000 barrels per day that were pledged yesterday, Thursday, come divided by 200,000 barrels per day from fuel exports from Russia and the rest from 6 members, according to Archyde.com.
The UAE said it had agreed to reduce production by 163,000 barrels per day, while Iraq announced that it would reduce an additional 220,000 barrels per day in the first quarter.
Algeria said that it plans to voluntarily reduce its oil production by 51,000 barrels per day for the first quarter of 2024, while Kuwait announced that it will voluntarily reduce oil production by 135,000 barrels per day for 3 months, starting from the first of next January.
Saudi Arabia, Russia, the UAE, Iraq, Kuwait, Kazakhstan and Algeria were among the producers who said that the cuts would be phased out following the first quarter if market conditions allowed.
Fears
OPEC Plus’s focus on reducing production comes in light of the decline in prices, which had previously reached $98 in late September, as well as growing concerns regarding weak economic growth in 2024 and expectations of a surplus in supplies.
This month, the International Energy Agency expected a slowdown in demand growth during 2024 as “the last phase of the economic recovery that followed the Covid-19 pandemic dissipates and gains from energy efficiency, expanding electric vehicle fleets, and structural factors consolidate.”
Oil prices fell regarding 0.3% in early trading on Friday (Archyde.com)
Brazil Membership
OPEC Plus invited Brazil to become a member of the group, and the Brazilian Energy Minister said he hopes to join next January.
Brazil is among the 10 largest oil producing countries in the world, and the largest producer in Latin America since 2016.
Brazil’s crude oil production reached a record level of 3.7 million barrels per day last September, an increase of approximately 17% over the same month last year and an increase of 6.1% over August 2023, according to the “Argus Media” agency.
UBS analyst Giovanni Stonovo said, “Since Brazil is a large oil producer and is leading the growth of crude production, it is important to involve it, but it seems that they are not reducing production like Mexico, so it will end up being good for OPEC Plus, and less important for the oil market.” “, according to what was reported by Agence France-Presse.
The OPEC Plus alliance emerged in late 2016 when Russia and nine other countries joined OPEC to support declining oil prices, and since late 2022, the alliance has relied on production cuts of regarding 5 million barrels per day.
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