Rescheduled from Nov. 25–26 to Nov. 30, meetings of the powerful Organization of the Petroleum Exporting Countries and its allies, or OPEC+, sent prices plunging more than $3 per barrel in intraday trade on Thursday.
At 13:50 London time, the Ice Brent contract with January delivery was trading at $79.05 per barrel, down $3.40 from the previous trading session. With a January expiration, the Nymex WTI contract was trading at $74.40 per barrel, a decrease of $3.37.
The postponement’s reason was not disclosed by the OPEC Secretariat, which made the announcement.
It was not immediately clear if ministers would still adjourn at the OPEC secretarial headquarters in Vienna or if the OPEC+ group would meet virtually or in person on Thursday.
The Conference of the Parties climate summit (COP28) in Dubai is taking place on the same day as the OPEC+ meetings. This is a significant event for the host nation, United Arab Emirates, which is the third-largest OPEC producer, as well as other Arab energy companies that are addressing the green transition.
According to a report published earlier in the day by Bloomberg News, Saudi Arabia is not happy with some countries’ oil production levels, which is why the Sunday meeting may be postponed. Regarding the degree of compliance of certain alliance members with their respective output pledges, a senior OPEC+ delegate—who requested anonymity due to the delicate nature of the topic—agreed with the premise.
In addition to contributing to a separate wave of voluntary output cuts from several OPEC+ members that total 1.66 million barrels per day and will last until the end of next year, Saudi Arabia is imposing a 1 million barrel per day voluntary production decline until the end of this year.
The market environment for the impending meeting was difficult due to low oil prices, a slower-than-anticipated recovery in Chinese demand, and petropolitics in the midst of Middle East conflict.
Before a significant uptick in oil prices came from multiple voluntary supply reductions announced outside of the framework of OPEC+, the first half of the year saw high interest rates and banking turmoil cause a major decline in oil prices. With additional supply reductions of 1 million barrels per day and 300,000 barrels per day until the end of this year, Saudi Arabia and Russia topped the list of OPEC+ members who committed to reducing output by a total of 1.66 million barrels per day until the end of 2024.
The world’s largest oil importer, China, has seen a weaker-than-expected recovery, and tensions in the Middle East have renewed, causing prices to briefly surpass $90 per barrel.
Two OPEC+ delegates, who could only speak on the condition of anonymity, criticized the recent price pressures on liquidations in the future markets due to geopolitical risks prior to the meeting’s postponement. A third attributed market concerns more to global politics, particularly the events in Israel, than to supply and demand fundamentals.
Abdul Aziz bin Salman, the Saudi energy minister and chairman of OPEC+, has expressed frustration in the past over what they see as a mismatch in prices and supply-demand. Notoriety has it that the Saudi prince has been at odds with market speculators, telling them to “watch out” and expect a “ouch” in May.
At its next meeting, the OPEC+ group would need to announce that it would “support the market,” according to one of the three delegate sources. A fourth delegate added that cuts might be discussed. According to the last source, the alliance will also talk about baselines for specific nations. Baselines are the starting point from which quotas are calculated and are often the source of disagreement.
In the meantime, a fifth delegate determined that it is unlikely that the coalition will alter its production strategy due to the unpredictability of oil flows from Iran and Venezuela, where the United States has hinted at tightening and loosening its sanctions, respectively.
