(Bloomberg) — Saudi Arabia will make an additional voluntary cut of 1 million barrels of oil a day as part of a deal struck by OPEC+ after hours of tense haggling.
Saudi Energy Minister Prince Abdulaziz bin Salman unveiled the reduction in a statement, once again managing to pull off a surprise. The Saudi move is the most meaningful part of the deal, which also includes an agreement to extend voluntary cuts through 2024.
The main winner from the weekend’s talks is the United Arab Emirates, which gets a boost to its quota for next year. That comes at the expense of African members who were asked to give up part of their unused quota. While they’ve been falling short of their targets, it’s still a bitter political pill for them to swallow. That’s why talks dragged on so long, including some late night sessions in Vienna hotels.
The long weekend meeting was set against a backdrop of struggling oil prices, as uncertain demand and weak Chinese data sour sentiment. The prince had warned speculators to “watch out;” the market will give its verdict in just a couple of hours.
(Time stamps are local time in Vienna)
What’s In The Deal (8:20 p.m.)
After a fraught gathering, the OPEC+ group eventually came up with an agreement that seems to offer output cuts for 2024, but in reality will deliver the opposite.
For the remainder of the current year, the only change is a second unilateral cut by Saudi Arabia, which will reduce its output by a further 1 million barrels a day for the month of July. That additional reduction could be extended for longer, although Energy Minister Prince Abdulaziz refused to be drawn on when any such decision would be communicated to the market.
The additional cut will take Saudi production below 9 million barrels a day for the first time in more than a decade, excluding the extraordinary circumstances of the attack on its Abqaiq production facility and the Covid 19 pandemic.
OPEC’s west African members, along with several of the non-OPEC allies in the wider OPEC+ group agreed to accept lower output targets for 2024, based on assessments of their actual production capacities. The non-OPEC members include, Russia, Azerbaijan, Malaysia, Brunei and Sudan. The new targets for Angola, Nigeria, Congo and Russia will be independently assessed and might be altered again before they come into effect.
Those new targets won’t remove any physical barrels from the market, but will bring their targets closer to their actual production capacities. Offsetting those cuts to targets, the United Arab Emirates will see its target increase by 200,000 barrels a day from January. Those are barrels that it is almost certain to pump, as it remains keen to utilize more of the production capacity that it has added in recent years.
UAE Says It Will Stick With OPEC (7:45 p.m.)
UAE Energy Minister Suhail Al Mazrouei thanked his colleagues for the hike to its quota and expressed the country’s loyalty to the cartel.
“We will always support OPEC and will always stay together,” he said.
It’s an important statement from a country that has toyed with the idea of leaving OPEC, and threatened to leave in the past if it didn’t get a higher quota.
OPEC Sidesteps Question on Media Ban (7:30 p.m.)
Asked about the exclusion of journalists from Bloomberg, Reuters and the Wall Street Journal from the OPEC meeting this weekend, Prince Abdulaziz referred the question to the secretariat.
Secretary General Haitham Al Ghais said lots of journalists had been invited and defended the organization’s policy.
“This is our house,” he told reporters. “OPEC has always had an open policy, transparent.”
He offered no explanation for the exclusion.
Prince Says Will Do ‘Whatever Is Necessary’ (7:25 p.m)
Prince Abdulaziz pledged to do whatever it takes to stabilize the oil market, which is suffering from uncertain demand and weak Chinese economic data.
“We will do whatever is necessary to bring stability to this market,” he told reporters in Vienna.
He described the Saudis’ extra voluntary cut in his usual vivid terms: “We wanted to ice the cake.”
Saudi Levels Get Low (7:10 p.m.)
Saudi Arabia is to cut its production below 9 million barrels a day in July and could extend its additional voluntary cut beyond that. That would be the lowest production level for the kingdom since June 2021, when output was slowly recovering from the depths of the Covid 19 pandemic. On top of the 500,000 barrel a day voluntary cut announced in April, Prince Abdulaziz bin Salman anonunced a further 1 million barrel a day reduction for next month.
Saudi Cuts Alone Again (7 p.m.)
Saudi Arabia is taking a voluntary unilateral cut of 1 million barrels per day in July, for one month that can be extended. It’s the most meaningful part of the deal and makes good on the prince’s warning to speculators to “watch out”.
A Look at The Numbers (6:45 p.m.)
The OPEC+ group is keeping official production targets unchanged for the rest of the year, with voluntary output cuts announced in April to remain in force, but to remain voluntary. Production targets for several countries have been revised for 2024, with the United Arab Emirates getting an increase of about 200,000 barrels a day in its target and Angola, Equatorial Guinea, Gabon, Nigeria, Azerbaijan, Brunei, Malaysia and Sudan all seeing their allocations cut.
The increase in the UAE’s target will lead to an increase in real barrels reaching the market, while the cuts to the targets for the others won’t take any physical barrels off the market. They will simply bring targets into closer alignment with what those countries are actually pumping. The net effect — more OPEC+ oil at the start of next year — assuming nothing changes between now and then.
But let’s wait for the press conference, and more details from Saudi Arabia.
Voluntary Cuts Extended to End 2024 (6:30 p.m.)
The group agreed to extend the voluntary cuts it announced in April to the end of 2024, the cartel said in a statement. Russia will do the same with its voluntary cuts.
Ministers Reach Deal After Hours of Talks (5:31 p.m.)
OPEC+ members reached a deal to extend their production-cuts agreement into 2024, delegates said, without giving further details on the size of the supply curbs. African producers had previously objected to demands that they give up some of their unused output quotas in the interests of a broader deal.
Talks Ongoing After Panel Meeting (3:47 p.m.)
Talks among members of OPEC+ are still in progress after the JMMC ended without a formal recommendation, according to a delegate. The discussions are centering on productions quotas from which cuts are calculated, with some African nations still objecting to the proposals, delegates said.
Some African Officials Seen Leaving OPEC HQ (2:45 p.m.)
Some officials from the delegations of Angola and Gabon were seen leaving the OPEC Secretariat. Inside the building, OPEC+ ministers were still negotiating about African members’ quotas, a delegate said.
Talks on African Quotas Continue (2:22 p.m.)
Ministers continue to negotiate a way to overcome African members’ reluctance to tweak their quotas, as the meeting of the Joint Ministerial Monitoring Committee carries on. Angola is among those countries holding out and deal hasn’t been reached yet, delegates said.
Angola’s Reluctance (2:16 p.m.)
It’s not surprising that Angola would be opposed to any deal that would see its benchmark production level cut. Even if the change didn’t affect the country’s current output — not a foregone conclusion — it would certainly determine future ones. Angola retains ambitions to reverse recent declines in its oil production capacity and the last thing it will want is a restrictive OPEC+ output quota that would undermine its attractiveness to foreign investors.
In the short term, it is planning to boost crude exports in July to their highest since level since October 2020. Although, at 1.24 million barrels a day they still won’t take production levels close to its current target, which stands at 1.455 million barrels a day.
Several new offshore oil fields are due to come into operation in the next year or two, including TotalEnergies’ 30,000 barrel a day Begonia tie-back to Pazflor next year. In the longer term, the country has signed a heads of agreement with TotalEnergies for two offshore exploration blocks in the Kwanza Basin, which lies off the west African nation’s southern coast.
Ministerial Panel Begins Talks (1:24 p.m.)
The Joint Ministerial Monitoring Committee, which oversees the OPEC+ deal, began its meeting, delegates said.
Meeting Pushed Back Again (12:12 p.m.)
OPEC+ pushed back the start of the joint committee meeting, which was penciled in to start at 12 p.m., as informal talks between members to reach an agreement on production continue, delegates said.
Start of Meeting Delayed (11:17 a.m.)
The start of the meeting has been pushed back by an hour as talks between members continue, delegates said. The Joint Ministerial Monitoring Committee is now scheduled to begin at 12 p.m., followed by the full OPEC+ conference at 1 p.m., they said.
Congo Says Deal is Still Work in Progress (11:05 a.m.)
The Republic of Congo’s Minister of Hydrocarbons Bruno Jean-Richard Itoua, when asked about potential revisions to African countries’ production baselines, tells reporters that the group is still working on an agreement. The UAE and Angola are currently discussing the matter, said a delegate.
Ministers Arrive at OPEC Headquarters (10:57 a.m.)
National delegations including Venezuela, Kuwait and Iraq arrived at OPEC headquarters in Vienna before the scheduled start of talks at 11 a.m. The Joint Ministerial Monitoring Committee, which oversees the production cuts, will meet first, followed by a full conference of the group.
Formalizing Voluntary Cuts (10:33 a.m.)
One possible outcome for today’s meeting would be to formalize the voluntary cuts announced in April —…