VIENNA (Reuters) – OPEC and its allies met on Sunday to try to agree on further production cuts, sources told Reuters, at a time when the organization is facing a decline in oil prices and an imminent oversupply.
Sources said the group, known as OPEC+, had delayed the start of formal talks by at least three and a half hours because of members’ discussions on the sidelines of production baselines, from which cuts and quotas are calculated.
Sources said that the most influential members of OPEC and the largest Gulf producers, led by Saudi Arabia, are trying to convince African countries that suffer from a lack of production, such as Nigeria and Angola, to have more realistic production targets.
“Talks with African producers are proving difficult,” said an OPEC+ source. At the same time, the Gulf producing UAE is seeking a higher baseline to reflect its increasing production capacity, sources said.
OPEC +, which includes the Organization of the Petroleum Exporting Countries and allies led by Russia, pumps about 40 percent of global crude, which means that its political decisions can have a significant impact on oil prices.
Four sources familiar with the OPEC+ discussions told Reuters that additional production cuts were being discussed among options for Sunday’s session.
“We are discussing the full package (of changes to the agreement),” one of the four sources said.
Three of the four sources said the cuts could be as much as 1 million bpd, on top of the current cuts of 2 million bpd and the voluntary cuts of 1.6 million bpd announced in a surprise move in April and put into effect in May.
The April announcement helped push oil prices nearly $9 a barrel above $87, but they quickly fell back under pressure from concerns about global economic growth and demand. On Friday, the international benchmark Brent crude settled at $76.
If approved, the new cut would bring the total volume of cuts to 4.66 million barrels per day, or about 4.5% of global demand.
Normally, production cuts take effect a month after they are approved, but ministers can also approve implementation later. They can also decide to keep production steady.
Last week, Saudi Energy Minister Prince Abdulaziz said investors who cut oil prices or bet on lower prices should “watch out,” which many market watchers interpreted as a warning of additional supply cuts.
Baselines for 2023 and 2024
Three OPEC+ sources also said the group would address the issue of baselines for 2023 and 2024, which had previously been contentious.
Nigeria and Angola have long failed to produce in line with their targets, but they have opposed lower baselines because the new targets could force them to make real cuts.
By contrast, the UAE has demanded a higher baseline in line with its increased production capacity, but this could mean that its share of overall cuts could decline.
Western countries accuse OPEC of manipulating oil prices and undermining the global economy through high energy costs. The West also accused OPEC of standing by Russia despite Western sanctions over Moscow’s invasion of Ukraine.
In response, OPEC insiders said that money printing by the West over the past decade has driven inflation and forced oil-producing countries to work to preserve the value of their main exports.
Asian countries, such as China and India, bought the largest share of Russia’s oil exports and refused to join Western sanctions against Russia.
OPEC denied media access to its headquarters to reporters from Reuters and other news media.
(Covering) Ahmed Ghaddar, Alex Lawler, Maha El Dahan and Julia Payne. Writing by Dmitry Zhdannikov; Editing by Hugh Lawson, Emilia Sithole Matares, and Barbara Lewis
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