BAKU, Azerbaijan, June 6. The latest OPEC+ decision to cut oil output will make oil more expensive for importers, Spencer Welch, Vice-President, Head of Oil-Markets Midstream & Downstream Consulting at S&P Global Commodity Insights, told Trend.
OPEC+ has decided to adjust the level of overall crude oil production for OPEC and non-OPEC Participating Countries in the Declaration of Cooperation to 40.46 mb/d, starting 1 January 2024 until 31 December 2024.
“OPEC+ are clearly worried about the global economy being weak, and oil demand being weak, and are concerned about oil price being around $70/bbl. Most of the announcement (extra cuts) do not occur until 1 Jan 2024, the only extra cut in 2023 is Saudi Arabia announcing they would unilaterally cut supply by an extra 1 million b/d in July 2023. It is not known if this might extend further or even increase, it will likely depend on what happens to oil price/oil demand through 3Q23,” he said.
Welch noted that OPEC+ have been very effective at maintaining oil stability since 2020, this is further reinforcement that they intend to try to keep oil prices $80-90/bbl, they don’t want the price to slip further.
“By supporting price, it will help oil producers, but make oil more expensive for oil buyers. But oil was >$100/bbl for all of 2010-14, so $80-90/bbl price now is actually not too bad. Stability of oil price makes it easier to continue investing in oil production for the future, making sure there is sufficient oil supply to meet demand, and helping the oil producing countries to monetize their oil natural resources while they can,” he added.
The latest OPEC+ decision to cut oil production has significant implications for the global energy landscape. OPEC+, a coalition of the Organization of the Petroleum Exporting Countries (OPEC) and other major oil-producing nations, has chosen to reduce oil output in response to various market factors. This decision aims to stabilize oil prices and rebalance the supply-demand dynamics in the global oil market. By curbing production, OPEC+ seeks to address the potential oversupply and mitigate the downward pressure on prices. This move underscores the group's commitment to actively manage oil markets and maintain stability amidst evolving economic conditions. Additionally, it underscores the importance of international cooperation and coordination to tackle the challenges posed by fluctuations in oil supply and demand. The impact of this decision will reverberate across various sectors, influencing energy prices, investments, and the economies of both producing and consuming nations.
In particular, Azerbaijan is expected to adjust its crude production to 551,000 barrels per day throughout 2024. Earlier, OPEC predicted Azerbaijan's liquids supply for 2023 to rise by 37,000 b/d to average 0.7 mb/d.
Follow the author on Twitter: @Lyaman_Zeyn