- Cuts could amount to 1 million bpd – sources
- Saudi minister tells short sellers to ‘watch out’
LONDON, June 3 (Reuters) – OPEC and its allies began two days of meetings on Saturday that could culminate in further output cuts of as much as 1 million barrels per day, OPEC+ sources told Reuters, as the group faces flagging oil prices and a looming supply glut.
OPEC+, which groups the Organization of the Petroleum Exporting Countries and allies led by Russia, pumps around 40% of the world’s crude, meaning their policy decisions can have a big impact on oil prices.
Three OPEC+ sources told Reuters on Friday that cuts were discussed among the options for Sunday’s session, when OPEC+ ministers gather at 14:00 (1200 GMT) in Vienna.
OPEC held a separate brief meeting on Saturday, but ministers did not comment on possible policy decisions afterwards.
The sources said cuts could amount to 1 million bpd on top of existing cuts of 2 million bpd and voluntary cuts of 1.6 million bpd, announced in a surprise move in April and which took effect in May.
If approved, this would take the total volume of reductions to 4.66 million bpd, or around 4.5% of global demand.
“This figure is too early, we haven’t gone into these things (yet),” Iraq’s Oil Minister Hayan Abdel-Ghani said before the meetings, when asked about a possible cut of 1 million bpd.
Production cuts usually take effect the following month after they are agreed, but ministers can also agree on a later implementation. They can also decide to keep production stable.
Western nations have accused OPEC of manipulating oil prices and undermining the global economy through high energy costs. The West has also accused OPEC of going too far with Russia despite Western sanctions over Moscow’s invasion of Ukraine.
In response, OPEC insiders and observers have said that Western money printing over the past decade has fueled inflation and forced oil-producing nations to act to maintain the value of their most important export.
Asian countries such as China and India have bought the lion’s share of Russian oil exports and refused to join Western sanctions against Russia.
“We look forward to a resolution that will ensure a sustainable balance between supply and demand,” UAE Energy Minister Suhail Al Mazroui said ahead of the meetings.
Ministers spoke to reporters at their hotels in Vienna. OPEC has denied media access to its headquarters to reporters from Reuters and other news outlets.
The surprise production announcement in April helped drive oil prices about $9 a barrel higher to above $87, but they quickly retreated, under pressure from concerns about global economic growth and demand. On Friday, the international benchmark Brent settled at 76 dollars.
Saudi Arabia’s Energy Minister Prince Abdulaziz said last week that investors shorting oil prices, or betting on a price drop, should “watch out”, which many market watchers interpreted as a warning of further supply cuts.
The International Energy Agency expects global oil demand to rise further in the second half of 2023, potentially pushing up oil prices.
However, analysts at JPMorgan said OPEC had not acted quickly enough to adjust supply to record levels of US production and higher-than-expected Russian exports.
“There is simply too much supply,” the JPMorgan analysts said in a note, adding that additional cuts could amount to around 1 million bpd.
Edward Moya at brokerage OANDA said: “The oil market is doubtful a consensus for another production cut can be reached between the Saudis and Russians, but traders should never underestimate what the Saudis will do and exploit during OPEC+ meetings.”
Reporting by Ahmad Ghaddar, Alex Lawler, Maha El Dahan and Julia Payne Writing by Dmitry Zhdannikov; Editing by David Holmes and Frances Kerry
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