OPEC+ Oil Production Meeting Postponed... Growing Backlash Against Saudi Arabia's Additional Cuts

Saudi Arabia Pushes Additional Production Cuts
Backlash from African Oil-Producing Countries

OPEC+, the coalition of oil-producing countries, announced that it will postpone the meeting originally scheduled for the 26th (local time) by four days and hold it on the 30th. The meeting was delayed as Saudi Arabia, leading OPEC+, proposed additional production cuts amid recent oil price declines, while opposition voices against the cuts grew mainly among African member countries. Concerns are rising that the unstable trend in oil prices will continue for some time due to conflicting interests among oil-producing countries.

[Image source=AFP Yonhap News]

According to Bloomberg News on the 27th (local time), OPEC+ announced that it postponed the regular meeting initially planned to be held online on the 26th to the 30th. Bloomberg reported that the meeting was delayed due to strong opposition from African oil-producing countries such as Angola and Nigeria against Saudi Arabia's proposed additional production cuts.

Major oil-producing countries, including Saudi Arabia and Russia, argue that additional production cuts are necessary to defend oil prices as international oil prices have fallen by more than 17% over the past two months. On the 27th, West Texas Intermediate (WTI) crude oil fell 0.90% from the previous session to $74.86 per barrel, breaking below the $75 mark, and North Sea Brent crude also dropped below $80 to $79.87 per barrel.

International oil prices, which were close to $100 per barrel as recently as September, sharply declined due to the de-escalation of clashes between Israel and the Palestinian militant group Hamas, as well as concerns over weak demand forecasts from the U.S. and China and economic downturn fears. As international oil prices rapidly fall, major oil-producing countries such as Saudi Arabia and Russia, which need to defend at least the $75 per barrel level to balance their fiscal budgets, are advocating for additional production cuts.

However, African countries, whose export volumes have significantly decreased due to ongoing production cuts, are opposing the measures out of fear of losing their market entirely. Additionally, the United Arab Emirates (UAE), which has recently invested heavily in securing new oil fields, is also negative about further production cuts, making short-term consensus difficult to achieve.

Nevertheless, there are forecasts that without additional production cuts, even the $70 level could be threatened, leading to a prevailing expectation that oil-producing countries will eventually reach an agreement on further cuts. According to a Bloomberg survey of traders and analysts, more than half of the experts expect OPEC+ to implement additional production cuts to tighten the market.

Goldman Sachs predicted that OPEC+ will maintain Brent crude prices between $80 and $100 per barrel through production cuts to prevent prices from falling below $80 next year. UBS also expects Saudi Arabia to extend the production cut trend through voluntary cuts until the first quarter of next year.