By John Ikani
Following a weekend of intense oil meetings in Vienna, the Organization of Petroleum Exporting Countries and other OPEC+ members have reached an agreement to maintain their current supply curbs until the end of 2024.
In a move to address production concerns, quotas for 2024 have been lowered for several countries including Nigeria, Angola, Azerbaijan, Malaysia, Congo, and others.
Under the new arrangement, Nigeria’s quota for 2024 has been reduced to 1.38 million barrels per day. Furthermore, the alliance has decided to deepen total quota cuts to 4.7 million barrels per day for July, which represents approximately five percent of global capacity.
However, it should be noted that many members have struggled to meet their production targets in recent years, resulting in actual physical reductions being significantly lower.
In an effort to tighten the oil market and counter bearish trade sentiment, Saudi Arabia has announced an additional cut of 1 million barrels per day in its crude output for at least the month of July.
Energy Minister Prince Abdulaziz bin Salman stated that this aggressive move was made in coordination with OPEC+ counterparts and emphasized its precautionary nature.
During a press briefing, Prince Abdulaziz explained, “We’re hedging. We’re using the fundamentals to hedge. We will continue to hedge as long as we don’t see clarity and stability in the market.”
Despite forecasts, including OPEC’s own projections, indicating a significant increase in global oil consumption in the coming months, the decision to extend supply curbs is seen as a cautious approach.
Analysts at S&P Global Commodity Insights anticipate annual demand growth of 2.3 million barrels per day in 2023, with a substantial portion expected in the second half of the year.
OPEC’s latest monthly oil market report also foresees a similar increase of 2.3 million barrels per day in demand.
