What was decided over the weekend?
OPEC and ten other oil states, collectively known as OPEC+, have announced that they will limit oil production to about 40 million barrels per day by 2024. By early October 2022 and by April 2023, OPEC+ countries had already begun to phase out oil production and now even less crude oil needs to be produced. In addition, Saudi Arabia has also announced that it will cut production by one million barrels of oil per day as early as July 2023.
Who is OPEC+?
OPEC+ is an unofficial association made up of the 13 OPEC countries and ten other independent oil-producing countries. OPEC (Organization of Petroleum Exporting Countries) consists of seven countries from Africa (Algeria, Libya, Equatorial Guinea, Nigeria, Gabon, the Republic of the Congo and Angola) and five countries from the Middle East (Saudi Arabia, Kuwait, the United Arab Emirates), Iraq and Iran) and Venezuela. Saudi Arabia is considered the leader of OPEC. The ten independent OPEC+ countries are: Russia, Mexico, Kazakhstan, Azerbaijan, Brunei, Malaysia, Oman, Bahrain and South Sudan and Sudan.
Why is OPEC+ reducing oil production?
In the spring of 2022, after the Russian attack on Ukraine, the oil price rose to a record high of more than USD 110 per barrel. However, since mid-2022, it has been steadily declining again and currently stands at USD 76 per barrel.
crude oil price last year
According to Saudi Arabia’s energy minister, OPEC+ is trying to “stabilize” falling oil prices. The Saudi energy ministry said the kingdom’s additional voluntary cuts are intended to “strengthen OPEC+ countries’ precautions in support of the stability and balance of oil markets,” the Saudi state news agency said on Sunday.
In fact, the consequence of a reduction in oil production is an increase in the price of oil. The energy minister called Saudi Arabia’s own reduction a “Saudi Lollipop”. What he probably meant by that: a gift to the other Member States. Because: An additional reduction in Saudi oil production means an even higher oil price, which in turn benefits the other oil producers in OPEC+, who can then sell the same amount of oil at a higher price. The Saudi reduction is only intended for July, but can be extended, according to the Saudi energy minister.
In October 2022, OPEC+ cut oil production by 2 million barrels per day, and in April 2023 by another 1.6 million barrels. Total global demand averages about 100 million barrels of oil per day.
US, Russia and oil
The US, which is not part of the OPEC+ countries, is the world’s largest producer of crude oil and follows an opposite trend from OPEC+. They want to increase international oil production, thereby lowering the oil price and thus combating the current inflation.
The US government has therefore already criticized the last two cuts in OPEC+. US President Biden argued that the increase in oil prices would indirectly help Russia as it relies on oil market revenues in the war against Ukraine.
What does this mean for the oil price?
International markets reacted to the weekend’s OPEC+ decision by raising crude oil prices. On Monday evening, prices rose about 2 percent to $76.5 a barrel. However, this is not a strong response from the markets.
With the latest changes of a few francs per barrel of oil (about 159 litres), this should not have a major impact on the prices of our oil products. However, it is difficult to estimate how prices will affect in the long run. On the one hand, the OPEC+ countries may decide to make even more surprising announcements. On the other hand, the price depends not only on the supply, but also on the development of global demand.
In addition, OPEC+ repeatedly announced cuts in oil production over the past year, which were subsequently not complied with. In February 2023, for example, Russia promised to produce 500,000 barrels less oil per day, and then report the highest export figures since the invasion of Ukraine with 8.3 million barrels of oil per day.
Soource :Watson
I am Amelia James, a passionate journalist with a deep-rooted interest in current affairs. I have more than five years of experience in the media industry, working both as an author and editor for 24 Instant News. My main focus lies in international news, particularly regional conflicts and political issues around the world.
