Opec+ members Saudi Arabia, the UAE, Iraq, Kuwait, Oman and Algeria will extend their voluntary oil production cuts until the end of 2024 as economic growth concerns weigh on the outlook for crude demand. Saudi Arabia, the world’s largest crude exporter, will make an additional voluntary output cut of 1 million barrels per day in July, which could be extended if required, the kingdom’s energy minister said during a press conference after Sunday’s Opec+ meeting.
“I would have to call it the Saudi lollipop,” Prince Abdulaziz bin Salman said.
“We continue to set the example of how much one needs to be transparent in order to achieve the most … dominant and more important priorities, which is seeking stability and sustainability,” he said. The UAE, Opec’s third-largest producer, will have its voluntary cut of 144,000 bpd in place until the end of December 2024. This is “a precautionary measure, in coordination with the countries participating in the Opec+ agreement, which had previously announced voluntary cuts in April”, Suhail Al Mazrouei, the UAE’s Minister of Energy and Infrastructure, said on Twitter. “This voluntary cut will be from the required production level,” Mr Al Mazrouei said. Russia will also extend its voluntary output cut of 500,000 bpd until the end of next year.
The decision was taken “in light of the continued commitment … to achieve and sustain a stable oil market, and to provide long-term guidance for the market, and in line with the successful approach of being precautious, proactive, and pre-emptive”, Opec+ said. The move took the group’s total production curbs to 3.66 million bpd, or 3.7 per cent of global demand.
Analysts Reiterate Calls For $100 Oil As Saudi Arabia Cuts Production
Brent prices could hit $100 by the end of this year as the new 1 million bpd production cut Saudi Arabia announced on Sunday would further tighten the oil market, analysts said after the OPEC+ meeting this weekend. The OPEC+ producers decided to keep the current cuts until the end of 2024, while OPEC’s top producer and the world’s largest crude oil exporter, Saudi Arabia, said it would voluntarily reduce its production by 1 million bpd in July, to around 9 million bpd. The Saudi cut could be extended beyond July, Saudi Energy Minister Prince Abdulaziz said on Sunday, describing the announced reduction as a “Saudi lollipop.”
“With Saudi Arabia protecting oil prices from sliding too low by cutting production, we think oil markets are now more prone to a shortfall later this year,” Commonwealth Bank of Australia analyst Vivek Dhar said in a note carried by Reuters.
ANZ analysts Daniel Hynes and Soni Kumari reiterated their $100 per barrel Brent target for the end of the year, saying that “Investors are likely to add bullish bets, comfortable that Saudi Arabia and OPEC will provide a backstop should the market hit any hurdles.” “The oil market now looks like it will be even tighter in the second half of the year,” ANZ noted. Goldman Sachs, which sees Brent at $95 per barrel in December, described OPEC+’s meeting as “moderately bullish” to its forecast and offsetting some bearish downside risks such as higher supply from sanctioned Russia, Iran, and Venezuela and weaker-than-thought Chinese demand. NN BlackMask Blog: