Opec+ still mulling options: Correction

Corrects Ice Brent crude futures price in 7th paragraph.

The Opec+ alliance is scheduled to meet virtually tomorrow, 30 November, to chart a course on its production policy for next year. But with just hours until the meeting begins it is unclear if there is consensus among ministers on what to do next.

Opec+ was originally set to hold a bi-annual ministerial meeting on 26 November in Vienna, but this was pushed back in a sign that pre-meeting talks were proving difficult.

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 country has done much of the heavy lifting in terms of production cuts in the past year and feels the rest of the coalition should shoulder more of the burden. Argus understands there has been push back from some members against an additional output reduction by the alliance as a whole. One delegate said a deeper cut, ranging from 500,000 b/d to 2mn b/d, had been discussed.

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, which includes a 1mn b/d unilateral cut that is to run until at least the end of this year.

What Saudi Arabia decides to do with this additional 1mn b/d cut beyond that is a key question. It had appeared likely that this would be extended into 2024, at least partly, but this may depend on the response it gets from the rest of the alliance for additional support.

Two delegates told Argus there was no appetite for a deeper cut, although one said the alliance could be forced to, given market conditions. Still, delegates said a rollover of existing policy should not be ruled out. At the very least there is an expectation that those members that have been producing above their production targets in recent months pledge to fully comply with their targets. Improved compliance by the group's overproducers could deliver a near 500,000 b/d real cut, Argus estimates based on October production figures.

But that the alliance is considering additional cuts suggests the demand picture next year may not be as strong as Opec has recently suggested. Opec sees oil demand growing by 2.25mn b/d next year, more than double the IEA's projection of 930,000 b/d. Higher supply forecasts for next year from countries outside Opec will be a factor weighing on ministers' minds, as will the drop in front-month Ice Brent crude futures from a 2023 high of $97.69/bl in September to around $83/bl today.

Opec earlier this month said the recent price fall was "mainly driven by financial market speculators" and pointed to "healthy oil market fundamentals."

Another source of contention relates to an Opec+ decision in June to lower the production quotas of some African members, such as Nigeria and Angola, from 2024. Neither country is happy with the production targets given to them by independent sources IHS, WoodMac and Rystad.

Nigeria is said to be arguing for an 80,000 b/d increase to 1.58mn b/d, and Angola to be pushing for a 100,000 b/d increase to 1.18mn b/d. While discussions around this have proven difficult, it is unlikely to jeopardise a wider production policy decision. One source said such issues are "between the individual countries and the independent sources", rather than the other members or the Opec secretariat.

By Aydin Calik, Nader Itayim and Bachar Halabi