VIENNA (AFP): Major oil producers led by Saudi Arabia and Russia met Sunday to discuss slashing output further in a bid to prop up prices, talks that are seen as tough amid tensions between Riyadh and Moscow.
The 13-member Organization of the Petroleum Exporting Countries (OPEC) is consulting with 10 other oil majors, including Russia, to review the grouping’s future output policy.
The in-person OPEC+ meeting is expected to start at the group’s headquarters in Vienna around midday local time (1000 GMT), two hours later than originally scheduled.
Analysts had largely expected OPEC+ producers to maintain their current policy, but signs emerged this weekend that the 26 countries may make deeper cuts.
In April, several OPEC+ members agreed to voluntarily cut production by more than one million barrels per day (bpd) — a surprise move that briefly buttressed prices but failed to bring about lasting recovery.
Oil producers are grappling with falling prices and high market volatility amid the Russian invasion of Ukraine, which has upended economies worldwide.
Most delegations remained tight-lipped as they arrived at the headquarters on Sunday.
Analysts are divided over whether heavyweights Riyadh and Moscow will keep the group on course with its current output policy, or further curtail production.
– All options ‘on the table’ –
An output cut of 700,000 bpd to one million bpd was one of the options being discussed, a source close to the discussions told AFP, while emphasising that nothing was set in stone.
All options remain “on the table”, Iran’s OPEC governor Amir Hossein Zamaninia told AFP on Saturday.
Oil prices have plummeted by about 10 percent 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 worry that demand will slump, with concerns about the health of the global economy as the United States battles inflation with higher interest rates and China’s post-Covid rebound stutters.
On arriving in Vienna on 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”.
– ‘United front’ –
It remains to be seen whether Riyadh will manage to convince Moscow to further curtail output, as Russia is dependent on oil revenues with its war in Ukraine dragging on and Western sanctions hitting its economy.
Russia’s Deputy Prime Minister Alexander Novak “sees no need for OPEC+ to change course” because it would hardly benefit from higher prices, Commerzbank commodity analysts said in a research note.
Since the Western sanctions against Moscow over Ukraine, Russia has been shipping its oil to India and China as the Asian giants soak up the cheap crude.
Novak did not comment as he entered the OPEC building on Sunday.
Saudi Arabia, on the other hand, “does need higher prices to balance its budget”, Commerzbank analysts said, adding that the kingdom’s break-even price is currently “at a good 80 dollars per barrel”.
Despite the tensions, both of the top OPEC+ producers “will no doubt be keen to keep the cartel together, as it has more power thanks to the united front it is showing”, they said.
In March 2020 the alliance was pushed to the brink of collapse when Moscow refused to cut its oil production even as the Covid pandemic sent prices into freefall.
After negotiations broke down, Riyadh flooded the market by boosting its oil exports to record levels, before the two countries came to an agreement.
“Saudi Arabia doesn’t want that scenario to come back — neither does Russia,” Alshammari said.