Daily Update: Facing Tough Decisions, OPEC+ Plays for Time
Today is Tuesday, June 11, 2024, and here’s your?curated selection of essential intelligence on financial markets and the global economy?from?S&P Global .?Subscribe?to be notified of each new?Daily?Update.?
The path forward for OPEC+ is perilously narrow. Some members are laser-focused on a higher oil price to balance their budgets, while others prioritize volume. Some members are overproducing while others continue to accept voluntary cuts. African members feel neglected. Russia, Iran and Venezuela remain under sanction. Production quotas have contributed to the market share of non-OPEC+ countries, but any hint of competing for market share is unacceptable to some members. At the center of it all, Saudi Arabia continues as the market-maker and the indispensable member that binds a fractious coalition of oil-producing states.
On June 2, a group of OPEC+ oil ministers gathered in Riyadh, Saudi Arabia, while others dialed in virtually. Those ministers attending in person were from the countries participating in voluntary production cuts. The agreements coming out of the Riyadh meetings seem to keep the status quo for production in place until September, at which point some of the voluntary cuts are rolled back. The United Arab Emirates won a much-sought concession from other OPEC+ countries that agreed to allow the UAE to increase its production quota by 300,000 barrels per day. Meanwhile, Russia, Kazakhstan and Iraq have agreed to submit compensation plans to other OPEC+ members following several months of overproduction.
The layering of production cuts and increases appears to be aimed at shoring up flagging crude prices, which are below what many OPEC+ members need to balance their budgets. OPEC+ deferred a baseline review of oil production until 2025, and production quotas from that review will not be instituted until 2026. Baseline reviews are controversial for OPEC+ members — the last baseline review in 2023 led to Angola quitting the OPEC+ group over steep production cuts.
On a recent episode of the Platts "Oil Markets" podcast , Payam Hashempour, lead analyst for crude and refined markets at S&P Global Commodity Insights, laid out the larger issues concerning market share that the OPEC+ group faces.
“Non OPEC+ production has indeed been a challenge since the pandemic for OPEC+ and kind of keeping the prices balanced,” Hashempour said. “We've seen how total liquids production from non-OPEC+ has exceeded total global demand growth, and we expect that to continue in '24 and '25. Now, a lot of that production is coming from North America.”
At the St. Petersburg International Economic Forum, Saudi Energy Minister Prince Abdulaziz bin Salman denied that non-OPEC producers' market share was a concern , insisting that OPEC+ continues to manage the oil market.
Today is Tuesday, June 11, 2024, and here is today’s essential intelligence.
Written by Nathan Hunt.
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