OPEC meeting postponed, intrigue surrounds change

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OPEC has postponed its meeting by four days from Sunday, November 26 to Friday, December 1 for reasons unknown. It is not usual for OPEC to reschedule meetings that have been fixed, so we wonder what led to such a decision. And why on the first day of the United Nations COP28 in Dubai? It is certain that the upcoming meeting will be a hard and difficult one, as we are entering the new year with all indications of slower demand for oil in 2024 and with more volumes of oil hitting the market.

Therefore, it looks like the postponement of the meeting is due to in-house discussions on how to go about the coming months, and how to face the growing crude oil volumes that are coming from different parts and pouring into the world markets, including two from the oil organization – Iran and Venezuela – which are free to produce with no quota restrictions. Certainly, the discussions next week will be focused on how much to reduce, and how to redistribute the cut/cuts, While some are resisting any cuts, others were promised increased quota volume to pay for their investments in new oil fields, which are ready to move it to international markets. Saudi Arabia cannot continue with its volunteer cut of one million barrels per day forever, without the help of others, while some of its members are exceeding their quota volumes.

Therefore, OPEC+ must be prepared for a further cut of one million barrels, perhaps from early next year, as oil prices could go down further and hit below $80 a barrel. This could sound the alarm bell, as most OPEC+ refuse to accept such a level with their annual expenditures, which need at least a price level of $85 a barrel to balance their budgets without deficits by year-end.

Oil is pouring faster from non-OPEC+ countries, like the USA with production of 12. 9 million, Canada with 4.5 million and the newcomer Brazil with 3.7 million barrels per day, and with most of its volumes targeting US markets. Iran is producing 3.5 million barrels and Venezuela 850,000 barrels from its low of 200,000 barrels of production, which is growing fast with the approval of the USA administration to keep the gasoline prices at an acceptable level in anticipation of 2024 presidential elections.

The concern however is that Saudi Arabia, with its commitment to volunteer cuts of one million barrels per day, has a time limit, should OPEC refuse further combined cuts, or maybe higher cuts of a maximum of 1.5 million barrels per day. A higher oil production, and not accepting any further volunteer cuts, is required, if its members do not accept further cuts in order to stabilize prices.

Some oil sources claim that Saudi Arabia may threaten to produce more oil and cancel its one million barrels commitment. The postponement of the OPEC meeting is an unusual routine for the organization; however, oil consumers should expect positive results from the delay.

By Kamel Al-Harami
Independent Oil Analyst
Email: [email protected]

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