Opec+ meeting delay points to unresolved issues

Opec+ postponing its ministerial meeting to 30 November set off a host of theories about what it meant for group unity and the fate of its deep production cuts.

Ministers were originally meant to meet on 26 November, but pushed back the date to the end of the month. Oil prices briefly slumped as news of the delay emerged, but have since stabilised. Delegates say they are confident that the group will reach a consensus on policy direction for the start of next year.

At the heart of the discussions is an insistence by Saudi Arabia that more needs to be done to support the market going into next year, delegates say. The coalition has already pledged more than 4.5mn b/d of collective or unilateral production cuts since October 2022. Saudi Arabia alone is responsible for more than 2mn b/d of that. But collective output has fallen by only 1.68mn b/d during this period as a number of producers were already struggling to hit their targets, while output has surged from Iran, which is not bound by targets.

Continued signs of weakness in global oil demand early next year, coupled with recent upward revisions to forecasts of supply from countries outside Opec in 2024, are lending support to the idea that Opec and its non-Opec partners may need to not only extend their production cuts into next year, but also introduce additional reductions. The question is how, and on what terms.

Saudi Arabia has already extended the additional 1mn b/d cut that it first announced in June to the end of this year. Riyadh could roll over this output reduction into 2024, delegates say. So too could Russia, which pledged to cut crude supplies by 500,000 b/d from August, although this was later downsized to 300,000 b/d and has since been further watered down to include oil products.

But this would only realistically happen alongside a renewed commitment by Opec+ members to production discipline — a return to full conformity by a number of countries in the coalition whose production has overshot their targets. Argus estimates that overproduction by some Opec+ members bound by output targets has been trending up — from 250,000 b/d in August to 490,000 b/d in October — thanks in large part to several repeat offenders, including Iraq, which overproduced by an average of 123,000 b/d in August-October.

Improved compliance by some in the group could deliver a near 500,000 b/d real cut, Argus estimates based on October production figures. But there is currently a desire to supplement that with an additional reduction by all participating members. "The burden of any new cut will need to be shared among the group," one Opec delegate says.

Time for change

Opec+ also faces discontent from two key African members — Nigeria and Angola — about reductions to their production targets that take effect from January. The revisions were first announced at the group's June ministerial meeting. As part of that agreement, Nigeria and Angola were to see 362,000 b/d and 175,000 b/d declines in their 2024 production targets to 1.38mn b/d and 1.28mn b/d, respectively — although those figures were understood to be preliminary, pending further independent assessment by three of Opec's seven secondary sources.

After the assessment, Nigeria secured itself a new target of 1.5mn b/d, while Angola saw its target slip by a further 200,000 b/d to 1.08mn b/d, sources say. The two are said to be arguing for upgrades — Nigeria by 80,000 b/d to 1.58mn b/d, and Angola by 100,000 b/d to 1.18mn b/d, according to sources. The discussions around these revisions are ongoing, although one source stresses that such issues are "between the individual countries and the independent sources", rather than the other members or the Opec secretariat.

By Nader Itayim, Bachar Halabi and Aydin Calik