Energy
Wednesday, November 22nd, 2023 3:15 pm EDT
Key Points
- Meeting Rescheduling and Market Impact: The OPEC+ meetings, originally scheduled for Nov. 25-26, were rescheduled to Nov. 30, resulting in a decline of oil prices by over $3 per barrel. The Ice Brent contract for January delivery dropped to $79.05 per barrel, down $3.40, and the Nymex WTI contract with January expiry was at $74.40 per barrel, down $3.37. The reason for the postponement was undisclosed by the OPEC Secretariat.
- Challenges and Factors Affecting Oil Market: The rescheduled meeting faced challenges in a market environment characterized by depressed oil prices, a slower-than-expected Chinese demand recovery, and geopolitical tensions in the Middle East. Factors such as high-interest rates and banking turmoil impacted oil prices in the first half of the year, with a subsequent boost from voluntary supply declines. OPEC+ members, including Saudi Arabia and Russia, pledged to reduce output by a total of 1.66 million barrels per day until the end of 2024.
- Market Concerns and OPEC+ Strategy: Prior to the meeting delay, concerns were attributed to recent price pressures on liquidations in future markets amid geopolitical risks. OPEC+ delegates expressed frustration over a perceived disconnect between supply-demand fundamentals and prices. The group, including Saudi energy minister Abdulaziz bin Salman, has been critical of market speculators, warning them in May. Discussions at the upcoming meeting may involve supporting the market, potential cuts, and discussions about baselines for certain countries. However, uncertainty regarding oil flows from Iran and Venezuela may impact the coalition’s production policy.
The Organization of the Petroleum Exporting Countries and its allies (OPEC+) rescheduled their crucial meetings from November 25-26 to November 30, leading to a decline in oil prices by over $3 per barrel. The Ice Brent contract with January delivery traded at $79.05 per barrel, down by $3.40, and the Nymex WTI contract with January expiry was at $74.40 per barrel, down by $3.37. The reason for the postponement was not disclosed by the OPEC Secretariat, leaving uncertainty about whether the meeting would be virtual or in-person.
A Bloomberg report earlier suggested that the meeting might be delayed due to Saudi dissatisfaction over some countries’ oil production levels. A senior OPEC+ delegate, citing compliance issues with output pledges, supported this premise. Saudi Arabia, a significant OPEC member, is enforcing a 1 million barrel-per-day voluntary production decline until the end of the year and contributing to a total of 1.66 million barrels per day in voluntary output cuts by various OPEC+ members, extending until the end of next year.
The oil market faces challenges, including depressed prices, a slow Chinese demand recovery, and geopolitical tensions in the Middle East. High-interest rates and banking turmoil affected oil prices in the first half of the year, offset by voluntary supply declines. Some OPEC+ members pledged to reduce output by 1.66 million barrels per day until 2024, with additional cuts from Saudi Arabia and Russia. Oil briefly surpassed $90 per barrel but retreated due to a weaker-than-expected recovery in China and increased tensions in the Middle East.
Prior to the meeting delay, OPEC+ delegates attributed price pressures to future market liquidations amid geopolitical risks. There is a perceived disconnect between supply-demand and prices, leading to frustrations within OPEC+. The group may need to make an announcement to “support the market” at the upcoming meeting, and discussions about potential cuts and baselines for certain countries are expected. However, uncertainty regarding oil flows from Iran and Venezuela, influenced by U.S. oil sanctions, may impact OPEC+’s production policy.
For the full original article on CNBC, please click here: https://www.cnbc.com/2023/11/22/oil-group-opec-and-its-allies-delay-policy-setting-meeting.html
