OPEC+ begins meetings where further output cuts could be agreed

  • Cuts could be as much as 1 million bpd – sources
  • Saudi minister ‘beware’ of short sellers
  • OPEC+ may also revise the basis for quotas – Sources

VIENNA, June 3 (Reuters) – OPEC and its allies began two days of meetings on Saturday that could culminate in production cuts of 1 million barrels per day, OPEC+ sources told Reuters, as the group faces oil prices and a flag. Supply gluttony.

OPEC+, a group of allies led by Russia and the Organization of the Petroleum Exporting Countries, pumps 40% of the world’s crude oil, meaning its policy decisions can have a huge impact on oil prices.

Three OPEC+ sources told Reuters on Friday that cuts were being discussed in options for Sunday’s session. Two other sources said additional cuts were unlikely.

OPEC held a separate briefing on Saturday, but ministers did not comment on possible policy decisions afterwards.

The three sources said the cuts would be 1 million bpd on top of the existing voluntary cuts of 2 million bpd and 1.6 million bpd, a surprise move announced in April that took effect in May.

If approved, this would bring the total reduction to 4.66 million bpd, or 4.5% of global demand.

“This figure is preliminary, we haven’t gone into these things (yet),” Iraq’s oil minister Hayan Abdel-Ghani said before the meetings, when asked about the 1 million bpd cut.

Production cuts usually take effect one month after they are agreed, but ministers can also agree to implement them later. They may decide to keep the output consistent.

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The West accused OPEC of manipulating oil prices and undermining the global economy through high energy costs. The West has accused OPEC of siding with Russia despite Western sanctions over Moscow’s invasion of Ukraine.

In response, money printing by the West over the past decade has fueled inflation and forced oil-producing countries to act to preserve the value of their key exports, OPEC insiders and observers have said.

Asian countries such as China and India buy the lion’s share of Russia’s oil exports and have refused to join Western sanctions against Russia.

Basic talks

OPEC+ ministers will meet in Vienna from 10 a.m. (0800 GMT) on Sunday, three hours earlier than originally planned, with a plenary meeting from 11 a.m.

Two OPEC sources said ministers could also discuss new production bases under which each member would make the cuts.

Such talks have been controversial in the past.

West African countries such as Nigeria or Angola have long been unable to produce in line with their targets, but resisted lower baselines because new targets might force them to make real cuts.

In contrast, the UAE has insisted on getting more bases to match its growing productivity, but that would mean its share of the overall cuts would decrease.

“We look forward to a resolution that preserves the stability of the supply and demand balance,” UAE Energy Minister Suhail Al Mazrouei said ahead of the meetings.

The ministers spoke to reporters at hotels in Vienna. OPEC has denied media access to its headquarters to reporters from Reuters and other news outlets.

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A surprise output announcement in April helped boost oil prices by about $9 a barrel to above $87, but they quickly retreated under pressure from worries about global economic growth and demand. On Friday, Brent, the international benchmark, was at $76.

Last week, Saudi Arabia’s Energy Minister Prince Abdulaziz said investors betting on lower oil prices or falling prices should “be careful,” in what many market watchers interpreted as a warning about further supply cuts.

The International Energy Agency expects global oil demand to rise further in the second half of 2023, pushing up oil prices.

However, analysts at JPMorgan said OPEC did not act quickly enough to adjust supply due to higher levels of US production and higher than expected Russian exports.

JPMorgan analysts said in a note that additional cuts would amount to about 1 million bpd.

(Reporting by Ahmed Khader, Alex Lawler, Maha El Dahan and Julia Payne) Writing by Dmitry Zhdanikov; Editing by David Holmes, Frances Kerry and Christina Finzer

Our Standards: Thomson Reuters Trust Principles.

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