Saudi Arabia will make an additional voluntary cut of 1 million barrels of oil a day as part of a deal struck by OPEC+ after hours of tense haggling. Saudi Energy Minister Prince Abdulaziz bin Salman unveiled the reduction in a statement, once again managing to pull off a surprise. The Saudi move is the most meaningful part of the deal, which also includes an agreement to extend voluntary cuts through 2024. The main winner from the weekend’s talks is the United Arab Emirates, which gets a boost to its quota for next year. 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.
- Saudi Arabia will make an additional voluntary supply cut of 1 million barrels a day in July
- UAE wins with a higher quota; African countries lose unused quota space
- Voluntary cuts extended to the end of 2024
- 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.
Saudi Arabia is to cut its production below 9 million barrels a day in July and could extend its additional voluntary cut beyond that. That would be the lowest production level for the kingdom since June 2021, when output was slowly recovering from the depths of the Covid 19 pandemic. On top of the 500,000 barrel a day voluntary cut announced in April, Prince Abdulaziz bin Salman anonunced a further 1 million barrel a day reduction for next month. Saudi Arabia is taking a voluntary unilateral cut of 1 million barrels per day in July, for one month that can be extended. It’s the most meaningful part of the deal and makes good on the prince’s warning to speculators to “watch out. The OPEC+ group is keeping official production targets unchanged for the rest of the year, with voluntary output cuts announced in April to remain in force, but to remain voluntary. Production targets for several countries have been revised for 2024, with the United Arab Emirates getting an increase of about 200,000 barrels a day in its target and Angola, Equatorial Guinea, Gabon, Nigeria, Azerbaijan, Brunei, Malaysia and Sudan all seeing their allocations cut. The increase in the UAE’s target will lead to an increase in real barrels reaching the market, while the cuts to the targets for the others won’t take any physical barrels off the market. They will simply bring targets into closer alignment with what those countries are actually pumping. The net effect — more OPEC+ oil at the start of next year — assuming nothing changes between now and then. But let’s wait for the press conference, and more details from Saudi Arabia. The group agreed to extend the voluntary cuts it announced in April to the end of 2024, the cartel said in a statement. Russia will do the same with its voluntary cuts. Ministers Reach Deal After Hours of Talk. OPEC+ members reached a deal to extend their production-cuts agreement into 2024, delegates said, without giving further details on the size of the supply curbs. African producers had previously objected to demands that they give up some of their unused output quotas in the interests of a broader deal.. One possible outcome for today’s meeting would be to formalize the voluntary cuts announced in April — equivalent to a reduction of about 5% — and apply them to the whole group. Extending that to the remaining members of OPEC+ would yield a reduction to the overall target of 2.1 million barrels a day. But it would entail a much smaller cut, of little more than 300,000 barrels a day, from estimated May production levels. It would also still leave both Angola and Nigeria pumping about 275,000 barrels a day below their new targets.
| Current target | Voluntary 5% cut
extended to all |
Additional 1 million
barrel a day cut |
|
|---|---|---|---|
| Algeria | 1,007 | 957 | 932 |
| Angola | 1,455 | 1,382 | 1,346 |
| Congo | 310 | 295 | 287 |
| Eq. Guinea | 121 | 115 | 112 |
| Gabon | 177 | 168 | 164 |
| Iraq | 4,431 | 4,209 | 4,099 |
| Kuwait | 2,676 | 2,542 | 2,475 |
| Nigeria | 1,742 | 1,655 | 1,611 |
| Saudi Arabia | 10,478 | 9,954 | 9,693 |
| UAE | 3,019 | 2,868 | 2,793 |
| Azerbaijan | 684 | 650 | 633 |
| Bahrain | 196 | 186 | 181 |
| Brunei | 97 | 92 | 90 |
| Kazakhstan | 1,628 | 1,547 | 1,506 |
| Malaysia | 567 | 539 | 525 |
| Oman | 841 | 799 | 778 |
| Russia | 10,478 | 9,954 | 9,693 |
| Sudan | 72 | 68 | 67 |
| South Sudan | 124 | 118 | 115 |
An additional cut of 1 million barrels a day from that new level would leave Saudi Arabia and Russia with formal targets of 9.7 million barrels a day. For the kingdom, that’s about 285,000 barrels a day below its current voluntary output target. For Moscow, it would be broadly in line with the level it says it’s pumping after its own 500,000 barrel-a-day cut, made in response to Western sanctions and price caps on its oil exports. But it would still leave production by the two big west African members well below their official quotas.