Tough negotiations as OPEC+ meets to decide over output amid tumbling prices

Uncertainty hovers over what major oil-producing nations — collectively known as OPEC+ — will decide when they meet on Thursday in a bid to halt a continuous slump in prices.

Amid stuttering global economic growth, analysts expect OPEC+ — the 13 OPEC members headed by Saudi Arabia and 10 partners led by Russia — to extend or deepen production cuts into next year to prop up prices.

The OPEC states are due to meet by videoconference at 11:00 am (1000 GMT), with their 10 partners slated to join at 3:00 pm to decide on next year’s OPEC+ output policy, according to a source close to the discussions.

But heading into the meeting, disagreement over output quotas appeared to persist among the OPEC+ group, which was forced to delay its key meeting by four days.

It remained unclear whether Saudi Arabia would succeed in convincing African producers to accept lower output targets to further buttress prices, as some members were pushing for higher production instead, sources told AFP.

In recent months, nine OPEC+ members including Riyadh, Moscow, Baghdad and Dubai have reduced their output.

Saudi Arabia has born the brunt of the cuts by voluntarily slashing production by a further million barrels a day since July.

– Elusive agreement –
Intense negotiations have continued in recent days as Saudi Arabi sought to convince African countries to chip in by accepting lower production quotas.

“We haven’t reached an agreement yet. We’re working on it,” a source close to the talks told AFP on Wednesday, speaking on condition of anonymity.

“Saudi Arabia is awaiting the response of the alliance’s African members,” said another source, adding that these states were reluctant to lower their quotas in 2024.

Angola and Nigeria are among those countries reluctant to sign up, said Carsten Fritsch of Commerzbank.

Both countries “want to step up their oil production and are therefore likely to demand that their production targets for 2024 be raised”, explained Fritsch.

According to DNB analysts, an agreement across OPEC+ to jointly curb production seems unlikely.

Instead, they predict that current quotas will be maintained.

Last week’s surprise announcement to postpone the policy meeting had “fuelled doubts about (Riyadh’s) willingness to leave its voluntary production cuts in place beyond the end of the year”, said Fritsch.

– Supply cuts –
Since the end of 2022, the alliance has implemented supply cuts of about five million barrels per day (bpd).

They initially slashed some two million barrels in their first in-person meeting after the Covid pandemic.

In May they implemented more cuts by nine members totalling 1.6 million bpd.

A month later, Riyadh announced it was to take a further one million barrels off the market, a decision extended month by month until the end of 2023 and followed to a lesser extent by Russia.

But investors have warned that cutting production might not be enough to prevent prices from plummeting.

Oil prices are far from the near-$140 a barrel reached after the Russian invasion of Ukraine.

But they remain above the average of the last five years, currently hovering at around $80 per barrel after peaking in September near $100.

Concerns among producers persist about demand falling owing to slowing economies, particularly China’s — the world’s biggest importer of crude.

On the supply side, “US and Brazilian crude production rose to record highs, while OPEC+ members exempted from cuts — Libya, Venezuela and Iran — have been able to increase their production as well”, said Giovanni Staunovo of UBS.