will the members of OPEC+ cut in the number of barrels?

2023-06-04 13:31:00

Will they find a response to oil prices at half mast? Against a backdrop of tension between Moscow and Riyadh, the thirteen members of the Organization of the Petroleum Exporting Countries (OPEC) met on July 4 in Vienna with their ten partners led by Russia, with the key to a possible cut of a million barrels per day among the options under discussion.

Oil: OPEC+ under pressure with the acceleration of the fall in prices

As of Tuesday 30, the price of a barrel of Brent from the North Sea for delivery in July fell heavily, by 4.58%, to 73.54 dollars. That of the barrel of West Texas Intermediate (WTI), American benchmark, for the same maturity lost 4.41%, to 69.46 dollars. Over one month, the decline is respectively over 8.1% and over 8.9%, and over one year the drop is even more spectacular, -35% and -38%.

“Everything is on the table” assures Iran

However, the outcome of the meeting remains very uncertain. The representatives of the various countries remained silent regarding their intentions when they arrived at the headquarters of the cartel, where a crowd of journalists awaited them.

“Everything is on the table”assured, on June 3, the governor of Iran, Amir Hossein Zamaninia. True to form, Saudi Prince Abdelaziz bin Salman was content to comment on the day’s weather, evading questions from journalists. His Emirati counterpart, Souhail ben Mohammed Al-Mazrouei, had said without further details “looking forward to a decision that will balance the market”

Prices fell by around 10%

While oil has raised the bar over the past two sessions, prices have fallen by around 10% since the surprise announcement in early April by some members of OPEC+ of a drastic cut in quotas. This measure has in fact failed to lift prices in a market depressed by fears of a global economic recession, rate hikes by the main central banks and the laborious recovery of demand in China as it emerges from the anti-Covid restrictions.

It remains to be seen whether Ryad will succeed in convincing the other pillar of the group, Russia, which seems reluctant to further tighten the floodgates of black gold – manna serving it to finance its military offensive once morest Ukraine. Russian Deputy Prime Minister Alexander Novak, present in the Austrian capital, “does not see the need for OPEC+ to change course”, underlines in a note Barbara Lambrecht, of Commerzbank. Because Moscow would hardly benefit from an increase in prices.

“I don’t think there will be any new decisions, following the one taken just a month ago, on the voluntary reduction of oil production by certain countries due to the weakness of the global economic recovery”indicated on May 25 Alexander Novak, Deputy Prime Minister of the Russian Federation, in a long interview granted Thursday to the Moscow daily, ​​Izvestia.

Oil: Moscow expects supply status quo at OPEC+ meeting on June 4

Saudi Arabia needs higher prices

Due to Western sanctions, only Russian oil priced at or below $60 can continue to be delivered. Beyond this ceiling, it is forbidden for companies to provide services allowing maritime transport (freight, insurance, etc.).

“On the other hand, Saudi Arabia needs higher prices to balance its budget”, specifies Ms. Lambrecht who evokes a break-even point around 80 dollars per barrel for Riyadh.

“I keep warning them that it’s going to hurt, like in April. I tell them: watch out! », threatened Saudi Arabia’s Energy Minister Prince Abdulaziz bin Salman during the Qatar Economic Forum he was attending on the 23rd, reports the Bloomberg agency.

Oil: the Saudi Minister of Energy warns “speculators” who bet on the fall in the price of a barrel

During their last major disagreement in March 2020, Russia refused to cut into its production to support prices dragged to the abyss by the Covid-19 pandemic. The Saudi kingdom then flooded the market with oil, permanently driving down prices.