By Emel Akan
OPEC countries and their partners, known as OPEC+, showed their commitment to higher oil prices at their meeting in Vienna on June 4.
Following their meeting, OPEC+ members extended their voluntary supply cuts until the end of 2024, which were first announced in April and were supposed to expire at the end of 2023, according to the Saudi Press Agency, the official news agency of the kingdom.
In addition, the Saudi Arabian Ministry of Energy announced that beginning in July, the country will implement a further voluntary cut in its crude production, amounting to 1 million barrels per day (bpd). This additional output cut can be prolonged beyond July, the news agency reported. As a result, Saudi Arabia’s output will be reduced to 9 million bpd in July, and its total voluntary cut will be 1.5 million bpd.
The decision comes after the OPEC+ crude oil producers announced surprise additional production cuts of about 1.16 million barrels bpd in April.
The weekend meeting of OPEC+ was one of the most heated in recent years. Tensions are rising between Saudi Arabia and Russia, two of the world’s largest oil producers, over output limits, according to The Wall Street Journal. That report stated that Russia continues to push massive amounts of cheaper oil into the market, undercutting Saudi Arabia’s efforts to boost oil prices.
OPEC+, which includes 23 oil-producing countries, accounted for about 60 percent of global oil production in 2022.
These production cuts have been a major source of concern for the Biden administration, since they may eventually harm U.S. consumers by increasing inflationary pressures, particularly at the gas pump.
On June 2, White House press secretary Karine Jean-Pierre declined to comment on the OPEC+ meeting, stating, “We’ll all see what comes out of those discussions.”
According to AAA data, the national average gasoline price was $3.553 per gallon on June 4, down around 2.5 cents and $1.27 from one week ago and one year ago, respectively.
Oil prices spiked to more than $80 per barrel in April after the decision by OPEC+ to cut production, but have since reversed course, plunging to about $70 per barrel.
According to media reports, Saudi Arabia, OPEC’s de facto leader, pressed for tighter oil supply during the last meeting in order to raise oil prices. It has requested that smaller African producers lower their quotas, which has been met with opposition from African countries.
According to the International Monetary Fund’s most recent economic predictions, Saudi Arabia requires oil prices of $80.90 per barrel to balance its budget this year.
Following the meeting, Russian Deputy Prime Minister Alexander Novak told the Rossiya-24 TV channel that Russia is honoring its commitments to reduce oil output and that there are no disagreements with Saudi Arabia.
“The result of the discussions was the extension of the deal until the end of 2024,” Novak said, according to Reuters.
Oil prices dropped significantly last week after China reported gloomy manufacturing data, increasing concerns that demand from the world’s largest crude importer could be weaker than expected.
Novak stated that they’re keeping a close eye on China’s recovery post-COVID-19.
The next OPEC+ meeting will be held on Nov. 26 in Vienna, according to an OPEC statement.
In April, the majority of the reduction in output came from Saudi Arabia and Russia. The kingdom reduced its oil production by 500,000 bpd in April, with a Saudi energy official describing the move as a “precautionary measure” aimed at “supporting the stability of the oil market.”
Russia, which had been reducing oil production by 500,000 bpd since March in response to Western sanctions over its invasion of Ukraine, also confirmed at the time that it would extend its initial three-month reduction by another six months.
Other OPEC+ members followed suit. Iraq announced a cut of 211,000 bpd, followed by the United Arab Emirates (144,000 bpd), Kuwait (128,000 bpd), Kazakhstan (78,000 bpd), Algeria (48,000 bpd), and Oman (40,000 bpd).
Tom Ozimek contributed to this report.
