OPEC+ may cut oil production by another 1 million barrels

The Organization of the Petroleum Exporting Countries and its allies, including Russia (OPEC+), gathered in Vienna, Austria, to decide whether to extend current production cuts or take further action to boost oil prices.

OPEC+ is discussing deeper oil production cuts, possibly as much as 1 million barrels per day, after oil prices fell to $70 a barrel and market analysts spoke of a new supply glut, Reuters reported.

Market stability

Most analysts expect OPEC+ to keep oil production levels unchanged, but the group has surprised markets several times over the years, including a shock cut announced two months ago.

The cuts could be as high as 1 million barrels per day, sources said. If approved, the total cuts would rise to 4.66 million barrels per day (about 4.5% of global demand), including a cut of 2 million barrels per day from November and a voluntary cut of 1.6 million barrels per day from May until the end of 2023.

OPEC+ currently supplies about 40% of the world's crude oil, so its policy decisions can have a major impact on oil prices.

OPEC+ unexpectedly announced a cut in oil production of about 1.16 million barrels per day from May until the end of 2023, bringing the total oil production cut from November 2022 to 3.66 million barrels per day. Photo: Tehran Times

Western nations have accused OPEC of manipulating oil prices and undermining the global economy through high energy costs.

Meanwhile, OPEC officials and insiders say Western money printing over the past decade has fueled inflation and forced oil-producing nations to act to maintain the value of oil.

“The main goal of OPEC and its allies is to maintain the stability of the oil market and avoid any volatility,” Hayyan Abdul Ghani, Iraq’s oil minister and deputy prime minister in charge of energy affairs, said on June 2.

“We will not hesitate to take any decision that brings more balance and stability,” Mr. Ghani affirmed.

OPEC ministers will meet on June 3, followed by an OPEC+ meeting on June 4.

Balance the budget

The production cuts announced in April are only a month old and will last until the end of the year, making it difficult to assess their impact at this point, analysts at JPMorgan said.

The cuts will only appear in export data in the second week of May, so it could take a few more weeks to see how the OPEC+ decision is implemented and how effective it is, the bank said.

The announcement of production cuts helped push oil prices above $87 a barrel, but that quickly fell due to concerns about global demand and economic growth.

The international benchmark Brent crude price has fallen as low as $70 in recent days, a level analysts say is not enough for Saudi Arabia and other Middle Eastern producers to balance their budgets this year.

Russian Deputy Prime Minister Alexander Novak said that the current oil price of $75-76 reflects the market's assessment of the global economic situation. Photo: Reuters

In May, the International Monetary Fund (IMF) said Saudi Arabia needed oil prices at $80.90 a barrel to balance its budget in 2023.

Last week, Saudi Arabia’s Energy Minister Prince Abdulaziz bin Salman advised oil short sellers to “watch out,” which market observers said could be a warning about potential supply cuts.

However, Russian Deputy Prime Minister Alexander Novak said he did not expect any new steps from OPEC+ in Vienna, as the organization had just made a decision regarding voluntary oil production cuts a few months ago.

Brent crude oil prices could exceed $80 a barrel by the end of this year, due to increased demand in the summer and OPEC+ production cuts , Novak said.

Nguyen Tuyet (According to Bloomberg, Reuters, Oil Price)

Source: https://www.nguoiduatin.vn/opec-co-the-cat-giam-san-luong-dau-them-1-trieu-thung-a610940.html