Saudi makes additional 1 mil bpd cut as OPEC+ extends current deals
Quantum Commodity Intelligence – Saudi Arabia is set to make further oil production cuts as part of a deal reached Sunday, while OPEC+ members agreed to extend current output deals until the end of 2024.
Saudi Arabia will slash production by a further 1 million bpd in July, reducing output from the OPEC kingpin to around 9 million bpd, versus its new quota of 10.478 million bpd and levels not seen since the height of the 2020 pandemic.
However, the reduction is initially for just one month, but Saudi officials said it can be extended.
The meeting and final announcement were delayed for several hours amid wranglings over output cuts and baseline levels, from which quotas are calculated against.
In a compromise deal, several members, including UAE, Nigeria and Angola, are to be allocated new baselines.
Last October OPEC+ announced a headline cut of 2 million bpd from November, which analysts said would result in around 1 million bpd of actual cuts.
This was followed up in April as several OPEC+ members announced cuts amounting to around 1.15 million bpd from May until the end of 2023 – a move the US government described as "unwise".
Russia in April also said it will extend its additional 500,000 bpd cuts until the end of the year, which it confirmed Sunday have been further extended until end-2024.
Compliance had been expected to be high on the list of talking points, with data showing Russia failing to fully implement 500,000 bpd of cuts announced earlier this year.
Despite the production cuts and demand growth forecasts for this year largely holding up, oil prices have continued to slide in 2023, including further steep losses last month.
The May monthly average price for benchmark Middle East Dubai, which is the primary sales-reference price for Middle East oil producers, tumbled over 10% versus April.
Quantum's price in May for Dubai averaged $74.93/b, the lowest average since December 2021, bringing tumbling prices back into focus as this weekend's OPEC+ meeting.
OPEC+ also said in a statement that it will limit combined oil production to 40.463 million bpd over January-December 2024.
The 36th OPEC and non-OPEC Ministerial Meeting on Sunday 26 November 2023, in Vienna.
Key OPEC+ decisions
April 2020
OPEC+ agrees to a record supply cut of 9.7 million bpd, oil prices rebound.
June 2020
Producers agree to extend the first phase of the 9.7 million bpd cuts for another month but announce plans for reduced cuts to 7.7 million bpd starting in August.
December 2020
Members announce a small 500,000 bpd increase for January 2021. Agree to hold meetings on a more regular basis in 2021 to review market conditions.
January 2021
Agrees to keep output steady except for small increases in Russia and Kazakhstan. Saudi Arabia announces a voluntary 1 million bpd cut for February and March.
April 2021
OPEC+ agrees to gradually increase production by 1 million bpd May-July, while Saudi to restore 1 million bpd of voluntary cuts.
June 2021
OPEC+ meeting lasts under one hour, ends with an agreement to stick with the existing plan, but no discussion on output changes for August and beyond.
July 2021
OPEC+ agrees to increase output by 400,000 bpd each month from August to December, adding 2 million bpd in total, but with the flexibility to review the proposed hikes.
December 2021
Agrees to a further 400,000 bpd hike in January after pressure from consumer countries, despite Omicron Covid surge and Q1 oversupply fears.
Late-March 2022
May quotas set to rise by a combined 432,000 bpd, linked to higher baseline levels. Shrugs off pressure to ramp up production after Russia's invasion of Ukraine.
June 2022
OPEC+ agrees to increase output by 648,000 bpd in both July and August.
August 2022
Modest increase of 100,000 bpd announced for September.
September 2022
Reverses September increase, returns to August quotas.
October 2022
OPEC+ announces a headline cut of 2 million bpd from November, which analysts say will result in around 1 million bpd of actual cuts.
February 2023
Russia announced a 500,000 bpd starting from March.
April 2023
Several members of the OPEC+ producer group announced production cuts amounting to around 1.15 million bpd from May until the end of 2023, while Russia said it will extend its 500,000 bpd cut until the end of the year. The US government called the decision "unwise".
June 2023
Saudi Arabia set to cut production by further 1 million bpd for July, while members agreed to extend current deals until the end of 2024.
