A difficult problem for OPEC+

Despite a four-day delay to resolve internal disagreements, the online meeting of the Organization of Petroleum Exporting Countries and its partners (OPEC+) on November 30th still faced many unanswered questions.

To prevent falling oil prices, OPEC+ has pledged to cut production. (Source: Reuters)

First, there is the challenge from a volatile market due to falling oil prices stemming from a slower-than-expected recovery in Chinese demand and conflicts in the Middle East. Amidst this negative market sentiment, the latest forecasts suggest that Brent crude oil prices will average only $83 per barrel in 2023 and the following year.

To prevent falling oil prices, OPEC+ has committed to reducing total production by 1.66 million barrels per day until the end of 2023 in previous meetings. Leading this effort are Saudi Arabia and Russia, with cuts of 1 million and 300,000 barrels per day, respectively.

But to keep oil prices at the desired level of around $100/barrel, these cuts must be maintained into 2024, if not further reduced. In addition, besides persuading Saudi Arabia to maintain the cuts, OPEC+ must also determine the baseline – the level of quotas for each member country.

However, this is a highly controversial issue, especially among African countries. Angola and Nigeria are dissatisfied with the fishing quotas set for 2024 and want to increase them. Nigeria is even currently exceeding its 2024 quota.

Another challenge is understanding market supply and demand to implement cuts without losing market share to non-OPEC+ competitors such as the US, Canada, and Brazil. US oil production is projected to reach a record 12.8 million barrels per day in 2023, up from the previous forecast of 12.6 million barrels per day.

Because OPEC+ accounts for 40% of the world's total oil production, solving the oil price problem not only impacts the revenue of its members but also the prospects of the global economy .

Source: https://baoquocte.vn/bai-toan-kho-voi-opec-252045.html