Saudi Arabia, an OPEC heavyweight, decided on Sunday to make a further cut in production in the hope of boosting slumping oil prices, against an economic backdrop overshadowed by the war in Ukraine.
This voluntary reduction of around one million barrels a day applies from July and “may be extended”, Saudi Prince Abdelaziz ben Salmane told a press conference at the end of a meeting in Vienna of the thirteen members of the Organisation of the Petroleum Exporting Countries (OPEC) and their ten allies led by Russia.
In addition, the cuts introduced at the beginning of May by nine countries, including Riyadh and Moscow, totalling 1.6 million barrels per day, “have been extended until the end of 2024”, Russian Deputy Prime Minister Alexander Novak told journalists at the exit.
Following difficult discussions, the United Arab Emirates, which wanted to pump more, obtained an increase in the basis for calculating its crude oil production quota, according to the new table published by OPEC.
According to Bloomberg, this request initially came up against the reluctance of Angola, Congo and Nigeria, who in return saw their targets lowered for next year, even though they are struggling to meet them.
The looming spectre of recession
Riyadh’s move comes at a time when oil prices have plummeted in recent months, despite the surprise announcement in early April of drastic cuts.
The measure failed to lift prices in a market depressed by fears of a global economic recession, rate rises by the main central banks and the slow recovery in demand in China following the end of anti-Covid restrictions.
While tensions between Riyadh and Moscow threatened to disrupt the meeting, OPEC+ maintained a united front by staying the same course.
Russia is in fact reluctant to further tighten the valves on its black gold – the windfall it uses to finance its military offensive against Ukraine.
Moscow would hardly benefit from higher oil prices. As a result of Western sanctions, only Russian oil priced at 56,02 euros ($60) or less can continue to be delivered. Above this ceiling, companies are prohibited from providing the services required for maritime transport (freight, insurance, etc.).
“On the other hand, Saudi Arabia needs higher prices to balance its budget,” explains Barbara Lambrecht of Commerzbank, who suggests a break-even point of around 75 euros ($80) a barrel for Riyadh.
“We have not had any disagreements. It was a joint decision made in the interests of the market”, Mr Novak assured media outlets.