In a critical move amidst fluctuating global oil prices, senior ministers from Opec+ have decided to maintain their current oil output policy. The decision was made during an online meeting of the Joint Ministerial Monitoring Committee (JMMC), a panel within the Organisation of Petroleum Exporting Countries and allies led by Russia, collectively known as Opec+. This steadfast approach, focusing on output cuts, has spurred international crude prices to nearly $90 a barrel, marking the highest level in five months.
The recent surge in oil prices can be attributed to a variety of factors, including tighter supply chains, attacks on Russian energy infrastructure, and ongoing conflict in the Middle East. Brent crude, a major trading classification of sweet light crude oil, escalated to nearly $90 on Wednesday, reaching its peak since late October 2023, following the conclusion of the Opec+ meeting.
Saxo Bank’s commodity strategist, Ole Hansen, commented on the decision, stating, “Opec+ decided to stick with oil supply cuts for the first half of the year, keeping global markets tight and potentially sending prices higher.” Opec+ members, notably led by Saudi Arabia and Russia, had previously agreed to extend voluntary output cuts of 2.2 million barrels per day (bpd) until the end of June 2024, a strategy aimed at bolstering the market.
In a post-meeting statement, Opec+ lauded the high level of conformity among members regarding the pledged output cuts. However, the organization did acknowledge that some countries need to improve adherence to these cuts and will report on their progress. Countries like Iraq and Kazakhstan pledged full conformity and compensation for overproduction, while Russia announced that its cuts in Q2 2024 will be based on production, not exports.
The statement from Opec+ also specified, “Participating countries with outstanding overproduced volumes for January, February, and March 2024 will submit their detailed compensation plans by April 30, 2024.” Russian Deputy Prime Minister Alexander Novak affirmed Russia’s full compliance with its Opec+ commitments to reduce oil supplies.
According to data from S&P Commodity Insights (formerly Platts), Opec+ overproduced by a net 275,000 bpd in January and 175,000 bpd in February 2024. Gabon, Iraq, and Kazakhstan were identified as the main members exceeding their quotas during these months.
As the current voluntary curbs approach their expiration at the end of June 2024, the total cuts by Opec+ are set to decrease to 3.66 million bpd, as part of a broader strategy initiated in 2022. The JMMC, which includes key Opec+ countries like Saudi Arabia, Russia, and the UAE, is scheduled to meet again on June 1, coinciding with the next full Opec+ meeting to determine future policy directions. This steadfast approach by Opec+ plays a pivotal role in shaping global oil markets, balancing supply and demand dynamics amid evolving geopolitical and economic landscapes.
