Energy
Wednesday, November 29th, 2023 3:16 pm EDT
Key Points
- Internal Disputes Over Baselines: There are internal disagreements within OPEC+, particularly involving heavyweight Saudi Arabia, over proposed lower baselines for next year. Angola and Nigeria have reportedly objected to these lower baselines, citing concerns about potential risks in the event of future output recoveries.
- Complications in OPEC+ Meetings: The virtual meetings, initially scheduled as in-person sessions, were downgraded to virtual conferences, coinciding with the start of the United Nations Climate Change Conference (COP28) hosted by the UAE. The shift to virtual meetings raises questions about the unity and coordination within OPEC+.
- Mixed Economic Signals: OPEC+ is grappling with a perceived disconnect between oil prices and supply-demand fundamentals. Recent oil prices have been influenced by factors such as liquidations in future markets and global political developments. Despite existing production cuts, there is a push for additional policy announcements to support the market, but uncertainties related to Iran and Venezuela may influence decision-making.
The article discusses the challenges faced by the Organization of Petroleum Exporting Countries and its allies (OPEC+) during their recent virtual meeting to determine future production policies. The meeting, initially scheduled as in-person sessions in Vienna, was downgraded to virtual conferences, coinciding with the start of the United Nations Climate Change Conference (COP28) hosted by the UAE.
Internal disagreements, particularly involving Angola and Nigeria, have arisen regarding proposed lower baselines for the next year. These baselines, which determine production cuts and quotas, have been a source of contention within OPEC+, with talks previously stalled due to UAE pushback in the summer of 2021. Angola and Nigeria, facing challenges like declining output and underfunding, are reluctant to accept lower baselines that could pose risks in the event of future output recoveries.
The article also highlights a perceived disconnect between oil prices and supply-demand fundamentals, frustrating OPEC+ members. Recent oil prices have been influenced by factors such as liquidations in future markets and global political developments, including the conflict in Gaza.
OPEC+ members currently have a 2 million barrels-per-day production cut in place, along with voluntary declines from some members. Additionally, Saudi Arabia and Russia have implemented supply drops until the end of this year. While there are discussions about potential policy announcements to support the market and the consideration of further cuts, uncertainties related to Iran and Venezuela complicate decision-making.
The article mentions potential tensions with the White House over calls for additional production, conflicting with efforts for global solidarity around decarbonization at COP28. The Middle East’s geopolitical situation, including the conflict between Israel and Hamas, adds further uncertainty to OPEC+ discussions. The coalition emphasizes its commitment not to politicize production, recalling the oil embargo of 1973 decided by the Organization of Arab Petroleum Exporting Countries.
Riyadh’s stance against Israel has intensified, with Saudi Crown Prince Mohammed bin Salman urging countries not to provide Israel with weapons. However, Iran’s calls for an Islamic oil embargo against Israel have gone unheeded, given Iran’s sanctioned status and reduced influence in OPEC+ diplomacy.
The situation in the Middle East, including decisions by Libya and Yemen, further complicates the security of popular oil routes in the Red Sea. Overall, OPEC+ faces a complex set of challenges involving internal disagreements, geopolitical considerations, and uncertainties in global oil markets.
For the full original article on CNBC, please click here: https://www.cnbc.com/2023/11/29/opec-producers-to-head-into-meeting-amid-quota-dispute.html
