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Oil falls, OPEC+ disagrees on production levels

Global oil prices plummeted after the OPEC+ group failed to reach a consensus on production levels for some members. Led by Saudi Arabia, others continued existing output reductions into 2024. The bottom line from the online meeting held on Thursday, delayed from Sunday, is that the status quo remains unchanged, with no mention of further production cuts in the group’s post-meeting statement.

This led to a more than 2% dip in the price of US West Texas Intermediate crude to around $76.08 per barrel and a more than 1.8% fall in the global marker, Brent, to $80.86 per barrel.

Although OPEC+ did not agree on a joint output reduction target, they did decide on voluntary production cuts of nearly 2 million barrels per day (bpd) for the first quarter of 2024. Of this, 1.3 million bpd will come from voluntary cuts by Saudi Arabia and Russia, with the rest from other members. These cuts are in addition to the existing ones agreed upon earlier in the year. Apart from Saudi Arabia and Russia, details about these cuts were not clear.

These cuts are on top of the 1.66 million bpd in voluntary cuts from OPEC+ set to last until the end of 2024, agreed upon in April.

The meeting’s outcome disappointed expectations, as there was no mention of cuts or an allocation table in the press release. Additionally, Brazil’s inclusion in OPEC+ without output limits or participation in cuts seemed superfluous.

The meeting was delayed due to disagreements over production baselines, particularly involving OPEC’s largest West African members, Nigeria and Angola. These disputes remain, along with Congo, but details about their baselines were not provided in post-meeting briefings.

Kuwait, a close Saudi ally, announced a 135,000 barrel per day reduction in output for the first quarter, while Algeria stated it would trim a further 51,000 barrels per day. Oman also committed to reducing output by 42,000 barrels per day during the same period.

In November, US crude fell by 7.7%, and Brent lost 6.9%. Year to date, both Brent and US crude have seen losses of more than 5%, contrary to OPEC+’s expectations when they decided on cuts in April, which continued every month since. Promised price increases did not materialise, while US output rose by a couple of hundred thousand barrels a day during the same period.

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