AFP, published on Sunday, June 04, 2023 at 11:40 am
OPEC + ministers meet in Vienna on Sunday to try to find a solution to falling oil prices, with the key to a possible further reduction in their production, against a backdrop of tensions between Moscow and Riyadh.
The thirteen members of the Organization of the Petroleum Exporting Countries (OPEC), who had already met on Saturday in the Austrian capital under the aegis of Saudi Arabia, are this time joined by their ten partners led by Russia.
This meeting, the second in the Austrian capital since March 2020, should start at midday (10:00 GMT), two hours behind the initial program.
According to a source familiar with the debates, a cut of 0.7 to 1 million barrels per day has been mentioned, but the outcome of the meeting remains very uncertain.
The representatives of the various countries remained silent about their intentions when they arrived at the headquarters of the cartel, where a crowd of journalists awaited them.
– Spectrum of recession –
“Everything is on the table”, assured the day before the governor of Iran, Amir Hossein Zamaninia.
True to form, Saudi Prince Abdelaziz bin Salman was content to comment on the day’s weather, evading questions from journalists.
His Emirati counterpart, Souhail ben Mohammed Al-Mazrouei, said without further details “impatiently awaiting a decision that will balance the market”.
While oil has raised the bar over the past two sessions, prices have fallen by around 10% since the surprise announcement in early April by some members of OPEC+ of a drastic cut in quotas.
This measure has in fact failed to lift prices in a market depressed by fears of a global economic recession, rate hikes by the main central banks and the laborious recovery of demand in China as it emerges from the anti-Covid restrictions.
Brent, the benchmark for crude oil in Europe, is currently trading at $76 a barrel, and its American equivalent, WTI at $71 – far from the peaks recorded in March 2022 at the start of the conflict in Ukraine (nearly $140).
Faced with the economic gloom, “the probability of a new cut has increased sharply,” Giovanni Staunovo of UBS told AFP.
If he still bets on a status quo despite everything, other analysts, like Yousef Alshammari of CMarkits, have changed their forecasts. Mr Alshammari now expects “Saudi Arabia to push for a cut of at least half a million barrels a day”.
– Maintain a “united front” –
It remains to be seen whether Ryad will succeed in convincing the other pillar of the group, Russia, which seems reluctant to further tighten the floodgates of black gold – manna serving it to finance its military offensive against Ukraine.
Russian Deputy Prime Minister Alexander Novak, present in the Austrian capital, “does not see the need for OPEC + to change course”, underlines in a note Barbara Lambrecht, of Commerzbank. Because Moscow would hardly benefit from an increase in prices.
Due to Western sanctions, only Russian oil priced at or below $60 can continue to be delivered. Beyond this ceiling, it is forbidden for companies to provide services allowing maritime transport (freight, insurance, etc.).
“On the other hand, Saudi Arabia needs higher prices to balance its budget”, specifies Ms. Lambrecht who evokes a break-even point around 80 dollars per barrel for Riyadh.
Despite these differences, “the two main producers of the cartel will no doubt be keen to maintain a united front to preserve their influence”, she believes.
During their last major disagreement in March 2020, Russia refused to cut into its production to support prices dragged to the abyss by the Covid-19 pandemic. The Saudi kingdom then flooded the market with oil, permanently driving down prices.
“Saudi Arabia does not want this scenario to happen again, nor does Russia,” argues Yousef Alshammari.