OPEC+ agrees preliminary oil cut deal of over 1 million bpd, sources say

FILE PHOTO: OPEC’s logo is seen in this illustration taken, October 8, 2023. REUTERS/Dado Ruvic Acquire Licensing Rights

LONDON/MOSCOW/DUBAI, Nov 30 (Reuters) – OPEC+ oil producers are likely to agree output cuts of at least 1 million barrels per day (bpd) for early next year led by Saudi Arabia rolling over its voluntary additional cut and smaller curbs by others, two delegates told Reuters ahead of a virtual OPEC+ meeting on Thursday.

Saudi Arabia, Russia and other members of OPEC+ pump more than 40% of the world’s oil, or some 43 million bpd. They currently have cuts of about 5 million bpd in place.

Two OPEC+ sources told Reuters a preliminary agreement has been reached for a cut of more than 1 million bpd.

This would include Saudi Arabia extending the voluntary cut of 1 million bpd it has had in place since July plus additional contributions from other members, sources said.

It was unclear how much other members would contribute, sources said. A third source said a new reduction would be agreed on Thursday without providing a figure.

“It depends on other group participants, could be near or more,” the third source said when asked about the possible 1 million bpd cut.

With Saudi Arabia’s voluntary output cut of 1 million bpd and a Russian export cut of 300,000 bpd both set to expire at the end of this year, the focus is on plans for 2024.

Benchmark Brent crude futures were up 1.02% to $83.95 a barrel at 1221 GMT on Thursday, on track for a third day of gains on expectations of fresh cuts from OPEC+.

Earlier, two delegates involved in the discussions said fresh cuts for 2024 could potentially take 1 million to 2 million bpd in production off the market in the first quarter of 2024.

RBC Capital Markets analyst Helima Croft said that Saudi Arabia, which began its additional voluntary 1 million bpd in July, would not want to shoulder additional cuts alone.

“We could envision a scenario where Russia and Saudi Arabia roll over their cut through the first quarter of 2024 and assemble a coalition of the willing individual producers prepared to make voluntary adjustments,” she added.

The focus is on lower output with prices down from near $98 in late September and concerns brewing over weaker economic growth in 2024 and expectations of a supply surplus.

The International Energy Agency (IEA) this month forecast a slowdown in 2024 demand growth as “the last phase of the pandemic economic rebound dissipates and as advancing energy efficiency gains, expanding electric vehicle fleets and structural factors reassert themselves.”

Yet OPEC+ sources this week said discussions had been proving difficult, as evidenced by the group postponing their meeting which was scheduled for Nov. 26.

Plans now call for an OPEC-only ministers virtual meeting on Thursday at 1100 GMT and a wider OPEC+ meeting at 1400 GMT.

Sources said the delay was sparked by disagreement over output quotas for African producers, a matter they said had largely been resolved.

The OPEC+ meeting coincides with the opening of the United Nations’ COP28 climate summit being hosted by OPEC member the United Arab Emirates.

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