The Organization of the Petroleum Exporting Countries and its allies, collectively known as OPEC+, announced a postponement of its highly anticipated virtual meeting to December 5, shifting from the originally scheduled date of December 1. This delay comes as the alliance grapples with decisions that could reshape the global oil market, reflecting both geopolitical challenges and economic pressures.
The group's secretariat cited scheduling conflicts, as several ministers plan to attend the Gulf Cooperation Council Summit in Kuwait on December 1. However, historically, OPEC+ has delayed meetings to secure consensus on production strategies, suggesting ongoing behind-the-scenes negotiations.
OPEC+ has been navigating a maze of challenges, including balancing production cuts to stabilize prices against the risk of oversupply. The coalition is currently adhering to three separate sets of output reductions. These include a baseline cap of 39.725 million barrels per day (bpd), an additional voluntary cut of 1.7 million bpd through 2025, and a temporary 2.2 million bpd reduction, which is under review.
Adding to the uncertainty, oil prices have experienced significant volatility. Brent crude was trading at $72.68 per barrel on Thursday morning, while West Texas Intermediate (WTI) stood at $68.58, both down 0.2% from their previous settlements. Analysts point to faltering demand in China, abundant U.S. supply, and a fragile ceasefire in the Middle East as key factors weighing on prices.
"OPEC+ are stuck between a rock and a hard place," remarked Harry Tchilinguirian, head of oil research at Onyx Commodities Ltd., emphasizing the complexity of the decisions facing the group, according to Bloomberg news.
Saudi Arabia and Russia, the de facto leaders of OPEC+, have been actively engaging with member states to ensure compliance with production quotas and secure alignment on future strategies. Saudi Energy Minister Prince Abdulaziz bin Salman recently met with Russian Deputy Prime Minister Alexander Novak and Iraqi Prime Minister Mohammed Shia Al-Sudani in Baghdad, stressing the importance of market stability. Similarly, discussions were held with Kazakhstan's Energy Minister Almassadam Satkaliyev to address production challenges.
The stakes are high for OPEC+ as it deliberates whether to delay the planned gradual increase in production of 180,000 bpd, initially set to commence in January 2024. Some delegates have suggested pushing this increase back by several months to avoid tipping the market into oversupply, a concern amplified by the International Energy Agency's forecast of a potential supply surplus.
Meanwhile, geopolitical factors loom large. The resumption of conflict or escalation in the Middle East, particularly involving Iran, could threaten oil infrastructure and disrupt global supply. Additionally, the upcoming return of U.S. President-elect Donald Trump, known for his aggressive energy policies and sanctions on Iran, adds another layer of uncertainty to the market.
OPEC+ is also facing internal challenges, as compliance with production cuts has been uneven among members. Iraq, Russia, and Kazakhstan have struggled to meet their commitments, although recent data indicates improvement in adherence.
