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Oil markets stand by ahead of Opec+ meeting

Weak global growth in 2024 could prompt further Opec+ cuts if the oil market shifts decisively into surplus, said Fitch Ratings Aramco
Weak global growth in 2024 could prompt further Opec+ cuts if the oil market shifts decisively into surplus, said Fitch Ratings
  • Upcoming meeting ‘critical’
  • More output cuts possible
  • African quotas a sticking point

Oil prices rebounded slightly on Wednesday but uncertainty reigned ahead of Thursday’s Opec+ meeting where the question of temporary cuts is likely to dominate.

Brent traded at $82.34 at 15.11 GST, while WTI climbed 1 percent to $77.36, supported by a supply disruption caused in the Black Sea, a weakening dollar, and reduced geopolitical risk as a result of a temporary truce in the Israel-Hamas conflict.

Opec+, composed of the Saudi-led Opec bloc of 13 countries and the Russian-led allies group, which has 10 participants, is due to hold its delayed meeting online on Thursday. 

“The upcoming Opec+ meeting will be critical in determining the state of production quotas and will be a key indicator for oil prices’ next movement for the next few weeks,” data and analytics company Kpler said in a note.

Analysts expect the group to roll over its voluntary cuts through next year. Further cuts may also be on the table amid concerns about the weakening physical market due to increased supply from Opec and non-Opec producers and global softening oil demand.

Saxo Bank Middle East said on Tuesday that the stability in oil prices suggested a probable deal on resolving African oil quotas. “The worst outcome may be avoided,” the bank said.

The Opec+ meeting was delayed from last weekend, mainly over a disagreement on output quotas for African producers. Some countries have seen their targets reduced for 2024 to put them in line with declining production levels.

According to assessments, Angola and Congo are pumping below their 2024 targets.

Nigeria however has been surpassing its current quota in recent months.

“Opec+ needs to send a strong message to prevent prices from falling much under the $80/bbl threshold,” Kpler said.

According to analysts, current oil prices remain acceptable for Riyadh, which could sustain even slightly lower prices, but not for long. 

“The threat of them crashing brings in some sense of urgency,” said Kpler.

Opec+ has pledged to remove some 5 million barrels per day (bpd), equivalent to 5 percent of daily global demand from the market, since last year, including Saudi and Russian voluntary cuts totaling 1.3 million bpd.

Despite these pledges, the global oil supply increased recently: Opec+ seaborne oil exports grew, mainly due to a rebound in Iranian oil shipments, while Saudi Arabian exports returned to June levels at 6.6 million bpd, according to Kpler.

Non-Opec producers Canada, Guyana, the US and Brazil have also increased their output.

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