OPEC + countries meet in Vienna to discuss their oil production strategy (AFP / JOE KLAMAR)
OPEC + countries decided on Monday to reduce their production to support prices in the face of recession fears, the first for over a year and the drastic cuts made due to the Covid-19 pandemic.
Representatives of the thirteen members of the Organization of Petroleum Exporting Countries (OPEC), led by Saudi Arabia, and their ten allies led by Russia, agreed to “return to the August quotas”, which is down 100,000 barrels from September, the Vienna-based alliance said in a statement.
The group, gathered by videoconference, leaves the door open to new discussions before the next meeting on 5 October, “to respond if necessary to market developments”.
During its monthly meetings, OPEC + is resisting calls from Westerners to open its doors more widely.
Rising with veiled words against the announced reduction, the United States reacted by demanding a balance between energy supply and demand on Monday.
Le président américain Joe Biden “a été clair sur le fait que l’offre d’énergie doit correspondre à la demand pour soutenir la croissance économique et réduire les prix pour les consommateurs américains et à travers le monde”, selon a communiqué de la Maison White.
“This symbolic decline is not a real surprise after the rumors of the past few weeks,” said Caroline Bain, analyst at Capital Economics, in a statement.
The Saudi Minister of Energy, Abdelaziz ben Salman, seemed to open the doors, ten days ago, to the hypothesis of a cut, denouncing a market “fallen into a vicious circle of low liquidity and extreme volatility”.
Affected by a gloomy global economic outlook, prices of the two global crude oil benchmarks have slipped in recent weeks from their highs in March, near $ 140 a barrel.
Around 19:20 GMT, the price of a barrel of North Sea Brent fell 0.53%, to $ 95.23, and the WTI, benchmark for the North American market, gained 2.3%, at $ 88.87.
– “Central Oil Bank” –
“This decision shows that we are ready to use all the tools at our disposal,” said the Saudi minister, in an interview with the financial agency Bloomberg. “We will be attentive and dynamic to support the stability and efficiency of the market.”
The alliance “means it will act to support prices if they fall,” for example in the event of a return of Iranian oil, said Matthew Holland, a geopolitical analyst at the Energy Aspects research institute.
For US President Joe Biden, who first visited Saudi Arabia as US president in mid-July to try and influence Riyadh’s strategy, it’s “a blow,” said analyst Craig Erlam. of the OANDA trading platform.
For him, the “political damage” caused by this controversial visit is “pure waste” with a “worse” result than before this initiative.
“Saudi Arabia and OPEC + are the + Central Oil Bank +,” jokes Bjarne Schieldrop, an analyst at the Swedish bank SEB. “Better never try to fight them.”
Moscow, a pillar of the group with Riyadh, for its part evoked “many uncertainties” linked in particular to the “declaration of the G7 leaders regarding the capping of the Russian oil price”, in the words of the Deputy Prime Minister responsible for energy matters., Alexander Novak.
– A question of “credibility” –
Another element taken into consideration is the regular inability of OPEC + to replenish its quotas.
“Current production and quotas are now disconnected, so it’s a question of credibility,” Schieldrop points out. It is estimated at nearly 3 million barrels per day below stated targets.
In the spring of 2020, the cartel made sweeping cuts in the face of the collapse in demand caused by the pandemic. A year later, he began to reopen the floodgates, but with great difficulty.
Extensive political crises or lack of investment and maintenance during the pandemic now hindering oil infrastructure: many countries in the group such as Angola or Nigeria cannot pump more.
Only Saudi Arabia and the United Arab Emirates appear to have spare production capacity.
But the analyst notes that Riyadh currently flows nearly 11 million barrels of oil per day, a level it had only reached twice in its history, and only temporarily.
“The current level is way above his comfort level,” Schieldrop points out.