Saudi is planning new oil cuts as part of the OPEC+ agreement, sources say

VIENNA, June 4 (Reuters) – Saudi Arabia will pledge new voluntary output cuts as part of a wider OPEC+ deal to curb production, sources told Reuters, as the group faces flagging oil prices and a looming supply glut.

The group, known as OPEC+, reached an agreement on production policy after seven hours of talks, the sources said.

Two OPEC+ sources said the group is likely to maintain an existing output deal for 2023 and make further cuts in 2024 if new production bases for members, from which cuts are made, are agreed.

It was not clear when Saudi would begin making its voluntary cuts or how much Riyadh and OPEC+ as a whole would cut.

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.

Since Friday, OPEC+ sources have told Reuters that further output cuts could amount to 1 million barrels per day on top of existing cuts of 2 million bpd and voluntary cuts of 1.6 million bpd, announced in a surprise move in April that entered effective in May.

The 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.

If approved, another cut would bring the total volume of reductions to 4.66 million bpd, or about 4.5% of global demand.

Production cuts usually take effect the month after they are agreed, but ministers can also agree to later implementation.

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.

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 siding with Russia despite Western sanctions over Moscow’s invasion of Ukraine.

In response, OPEC insiders 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 largest share of Russian oil exports and refused to join Western sanctions against Russia.

During Sunday’s meeting, OPEC’s most influential members and biggest Gulf producers led by Saudi Arabia tried to persuade underproducing African nations such as Nigeria and Angola to have more realistic production targets, sources said.

Nigeria and Angola have long been unable to produce in line with their targets, but have resisted lower baselines because new targets could force them to implement real cuts.

In contrast, the United Arab Emirates has demanded a higher baseline in line with its growing production capacity, but that could mean its share of the overall cuts could be reduced.

OPEC has denied media access to its headquarters to reporters from Reuters and other news outlets.

Reporting by Ahmad Ghaddar, Alex Lawler, Maha El Dahan and Julia Payne; Author of Dmitry Zhdannikov; Editing by Hugh Lawson, Emelia Sithole-Matarise and Barbara Lewis

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