OPEC+ agrees to cut oil production beginning in July and through 2024 in a bid to shore up prices and stabilise the market
Saudi Arabia will make a deep cut to its output in July on top of a broader OPEC+ deal to limit supply into 2024 as the group seeks to boost flagging oil prices.
Saudi’s energy ministry said the country’s output would drop to 9 million barrels per day (bpd) in July from around 10 million bpd in May, the biggest reduction in years.
“This is a Saudi lollipop,” Saudi Energy Minister Prince Abdulaziz told a news conference in Vienna. “We wanted to ice the cake. We always want to add suspense. We don’t want people to try to predict what we do… This market needs stabilisation”.
OPEC+, which groups the Organization of the Petroleum Exporting Countries and allies led by Russia, pumps around 40% of the world’s crude, meaning its policy decisions can have a major impact on oil prices.
OPEC+ has in place cuts of 3.66 million bpd, amounting to 3.6% of global demand, including 2 million bpd agreed last year and voluntary cuts of 1.66 million bpd agreed in April.
Those cuts were valid until the end of 2023 and on Sunday OPEC+, in a broader deal on output policy agreed after seven hours of talks, said it would extend them until the end of 2024.
Since Russia’s invasion of Ukraine began in February last year, Western nations have accused OPEC of manipulating oil prices and undermining the global economy through high energy costs. The West has also accused OPEC of siding with Russia.
In response, OPEC insiders have said the West’s money-printing over the last decade has driven inflation and forced oil-producing nations to act to maintain the value of their main export.
In addition to extending the existing OPEC+ cuts of 3.66 million bpd, the group also agreed on Sunday to reduce overall production targets from January 2024 by a further 1.4 million bpd versus current targets to a combined of 40.46 million bpd.
However, many of these reductions will not be real as the group lowered the targets for Russia, Nigeria and Angola to bring them into line with actual current production levels.
Nigeria’s daily crude oil production meanwhile surged to about 1.6 million barrels per day, and it’s expected to hit 1.8 million barrels per day, according to the Chief Upstream Investment Officer of the NNPC Upstream Investment Management Services (NUIMS) Bala Wunti made the disclosure following the OPEC+ meeting.
The NUIMS chief was also confident that with the technology deployed, Nigeria’s oil production will hit 1.8 million barrels by July or early August.
“It is what we are harvesting already, and the result of the security collaboration is what actually reversed the trend of our declining production.
“That we are back to about 1.6 million barrels today is a result of the collaboration. Everybody is working, the security agencies are working in synergy with the industry, the regulators are working and the communities,” he said.
The Nigerian government has benchmarked the 2023 budget at $75 per barrel and 1.8 million barrels per day, bpd, including condensate, which Nigeria has the capacity to produce between 300,000 – 400,000 bpd. Nigeria’s premium oil grade, Bonny Light is trading at $76 as at last Friday.
Akowe with materials from Reuters and Oil Trade