OPEC logo is seen in this illustration taken, Oct 8, 2023. REUTERS/Dado Ruvic
MOSCOW/LONDON – OPEC+ is set to consider whether to make additional oil supply cuts when the group meets later this month, three OPEC+ sources told Reuters after prices dropped by almost 20 percent since late September.
Oil has slid to around $79 a barrel for Brent crude from a 2023 high in September near $98. Concern about demand and a possible surplus next year has pressured prices, despite support from the OPEC+ cuts and conflict in the Middle East.
Saudi Arabia, Russia and other members of OPEC+ have already pledged total oil output cuts of 5.16 million barrels per day, or about 5 percent of daily global demand, in a series of steps that started in late 2022. The cuts include 3.66 million bpd by OPEC+ and additional voluntary cuts by Saudi Arabia and Russia.
One OPEC+ source, who declined to be named, said the existing curbs might be not enough and the group will likely analyze if more could be implemented when it meets. Two other OPEC+ sources said deeper cuts could be discussed.
READ: Saudi, Russian oil cuts to cause big supply shortfall: IEA
“It is not pleasant to see that market volatility is greater ahead of the next meeting while fundamentals overall remain solid,” one of the OPEC+ sources said. “Ministers are likely to express some thoughts on what to do more, to secure a stable trend.”
Ministers from OPEC+, which groups the Organization of the Petroleum Exporting Countries (OPEC) and allies led by Russia, meet on Nov. 26. The group already has a plan to curb supplies by 3.66 million bpd into 2024 made during its last meeting in June.
OPEC and the Saudi Energy Ministry did not respond to requests for comment on Friday.
The price drop has deepened this week, even after OPEC in a monthly report said the oil-market fundamentals remained strong despite “negative sentiment” and stuck to its relatively high 2024 oil demand growth forecast.
The International Energy Agency, which also updated its outlook this week, has a lower 2024 demand growth forecast and said the market could shift to a surplus in the first quarter.
While three sources said more cuts could be required, two other OPEC+ sources said it was too early to say whether further cuts will be discussed, while another said he did not think it was likely with the caveat to “wait and see”.
OPEC+ does not have a target for oil prices. Members depend on oil as a primary source of government income.
Analysts have told Reuters that Saudi Arabia’s oil cut extension raises the risk of Saudi economic contraction this year.
READ: Oil cut extension raises risk of Saudi economic contraction this year
Saudi Arabia has repeatedly stressed during previous meetings it wants to see strong compliance with cuts so all members share the burden of producing less.
At its last policy meeting in June, OPEC+ agreed on a broad deal to limit supply into 2024 and Saudi Arabia pledged a voluntary production cut for July of 1 million bpd that it has since extended to last until the end of 2023.
Some analysts including Energy Aspects expect Saudi Arabia to keep the voluntary cut to at least the first quarter of 2024.