Saudi Arabia will make additional voluntary cuts of 1mn barrels a day to its oil production in an effort to prop up prices following a fractious meeting of Opec+ in Vienna.
The kingdom’s energy minister Prince Abdulaziz bin Salman, Opec’s de facto leader, made the move as part of a deal in which several weaker African members will have quotas reduced from next year. Russia, the world’s second-largest oil exporter, could also have its production targets lowered, though the group said this was subject to review. Meanwhile, the UAE will be able to increase its production.
Prince Abdulaziz is attempting to support an oil price that has slid in the past 10 months despite several attempts by producers to tighten supplies.
The kingdom and other members announced a surprise cut in April but, after briefly rallying towards $90 a barrel, prices again reversed, falling towards $70 a barrel at one stage last week.
The 1mn b/d cut will initially be for July but could be extended, Prince Abdulaziz said, describing it as a “Saudi lollipop” or sweetener for the group.
“We want to just ice the cake with what we have done,” the minister said. “We will do whatever is necessary to bring stability to this market.”
The IMF says Riyadh requires an oil price above $80 a barrel to balance its budget, and to fund some of the “giga-projects” that Crown Prince Mohammed bin Salman hopes can transform its economy.
The Opec+ group’s collective production targets were adjusted to 40.5mn barrels a day for the duration of 2024, formalising and extending the voluntary cuts announced in April at the group level.
But the distribution of cuts was contentious, with many African members initially resisting efforts to revise down their so-called production baselines, which are supposed to reflect their maximum output capacity and are used to calculate the size of cuts they must make.
Weaker Opec members including Nigeria and Angola had already been struggling to hit existing output targets after years of under-investment, and were reluctant to make deeper cuts.
But the UAE has been pushing for a higher production baseline, reflecting investments in its industry.
Discussions between members went on late into the night after the meeting of core Opec countries on Saturday, according to delegates. Broader Opec+ talks involving Russia, Kazakhstan and Mexico got under way on Sunday. “We, as always, find common ground,” Russia’s energy minister Alexander Novak said as he left the meeting.
In a sign of growing tension between the Saudi energy minister and parts of the press, several journalists, including the entire teams from Reuters and Bloomberg, were blocked from attending the weekend’s meetings. It is the first time that Opec, through decades of wars, price spikes and crashes, has excluded news organisations in this way.
Opec has faced criticism for its alliance with Russia following the full-scale invasion of Ukraine and for trying to prop up prices during an energy crisis triggered by Moscow’s actions.
The decline in oil prices since October may have made the White House more sanguine about further production cuts, however, according to analysts, as the US tries to mend ties with Saudi Arabia.
