OPEC+ eyes to shore up oil prices by cutting output

An output cut of one million barrels per day one of the options being discussed, reports say

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This photograph shows a general view of the Petronor oil refinery in the Spanish Basque city of Muskiz. — AFP/File
This photograph shows a general view of the Petronor oil refinery in the Spanish Basque city of Muskiz. — AFP/File

In order to increase oil prices, the Organization of the Petroleum Exporting Countries (OPEC) held an in-person meeting in Vienna to cut the output as Saudi Arabia is consulting with major oil giants including Russia to review the group's future oil output policy.

The meeting of the 13-member organisation was held at its headquarters about three hours later than scheduled, AFP reported quoting a source.

According to the analysts, OPEC+ is to maintain their current policy, however, but signs have emerged this weekend that the 23 countries may make deeper cuts.

According to AFP, an output cut of one million barrels per day (bpd) was one of the options being discussed.

Several members of the oil organisation agreed in April to voluntarily slash production by more than one million bpd — a sudden move that briefly prevented prices to go up but failed to bring about lasting recovery.

Oil producers are grappling with falling prices and high market volatility amid the Russian special operation in Ukraine that commenced in February last year, which has upended economies worldwide.

The delegations were reported to have been tight-lipped as they arrived at the headquarters.

Analysts are divided over whether heavyweights Riyadh and Moscow will keep the group on course with its current output policy, or further curtail production.

Future challenges

According to Iran's OPEC governor Amir Hossein Zamaninia Saturday, all options remain "on the table".

Oil prices have plummeted about 10% since the April cuts were announced, with Brent crude falling close to $70 a barrel, a level it has not traded below since December 2021.

Traders expect the demand would slash, with concerns about the health of the global economy as the US battles high economic costs and higher interest rates while China's post-COVID rebound stutters.

On arriving in Vienna Saturday, Emirati energy minister Suhail Mohamed Al Mazrouei said he expected the "outcome of Sunday's meeting to balance the market and ensure we are ready for any challenges in the future.”

Amid fears of economic slowdown, "the probability of a new production cut being announced has considerably increased", UBS analyst Giovanni Staunovo told AFP, adding that he still believed OPEC+ would decide to maintain the current reduced output.

However, Yousef Alshammari of CMarkits said he expected Saudi Arabia "to push for a cut of at least half a million bpd".