Saudi Arabia seeks OPEC oil production quota cuts as some members resist

(Bloomberg) – Saudi Arabia is asking others in the OPEC coalition to reduce their oil production quotas in a bid to shore up global markets, but some members are resisting, delegates said.

The OPEC leader has been making a largely unilateral production cutback of 1 MMbpd since July, and is now seeking further support from across OPEC and its partners, said the delegates, asking not to be identified because the information is private.

Brent crude pared earlier losses and was little changed at $80.48 a barrel as of 3:56 p.m. in London.

The Saudi proposal comes amid difficult talks for the producers’ group, which was forced to delay its policy meeting by four days to Nov. 30 as Angola and Nigeria resist reductions to their own production quota limits for 2024, which were set out at the group’s last conference in June.

The producers were progressing toward a compromise on this matter before the weekend, but have yet to clinch an agreement, delegates said.

The 23-nation OPEC alliance faces pressure to intervene in crude markets, following a 17% drop in prices over the past two months amid plentiful supplies and a darkening economic backdrop. Markets could weaken further in early 2024, when forecasters including the International Energy Agency anticipate the emergence of a new supply surplus.

Saudi Arabia’s voluntary production cut of 1 MMbpd, implemented in tandem with a 300,000 bpd export reduction from Russia, is currently set to continue until the end of the year. Most analysts expect Riyadh and Moscow to extend those curbs into 2024.

Market watchers such as JPMorgan Chase & Co. have flagged the possibility that OPEC may cut deeper, and some — such as Commerzbank AG and hedge fund manager Pierre Andurand —  have warned that prices may buckle further if they don’t. Brent futures traded near $80 a barrel on Monday.

Supply reductions across the alliance would probably win back oil bulls, but they could be hard to orchestrate. Iraq, Russia and Kazakhstan have recently been pumping over their quotas, while others like the African members have lost so much production capacity, they’re in no position to cut further.

It’s also unclear whether the United Arab Emirates, a key member, will be under pressure not to proceed with a quota increase of 200,000 bpd permitted from January. Abu Dhabi secured the dispensation at the last OPEC gathering in June, in order to finally make use of recent investments in new capacity.