Oil producers fail to agree on further production cuts

Oil producers fail to agree on further production cuts

The group of oil producers known as OPEC Plus met on Thursday and failed to announce further production cuts in the face of falling prices, but Saudi Arabia later said that it would continue to reduce its production by a million barrels per day until March, in coordination with certain countries. other countries which have not been named.

Oil traders, perhaps expecting more substantial cuts, reacted coolly to the news. Futures fell for the day, with Brent crude down 0.4 percent, to $82.80 a barrel, and West Texas Intermediate down more than 3 percent, to $75.25.

“Early indications are that this is disappointing for markets relative to expectations that had been building over the last week,” said Richard Bronze, head of geopolitics at Energy Aspects, a research firm. Reports of production cuts preceded the meeting.

OPEC Plus said Brazil, an oil giant that has so far not been part of the producers’ group, is expected to join next year. Alexandre Silveira de Oliveira, Brazil’s Minister of Mines and Energy, attended the meeting via teleconference and confirmed that his country would join in 2024, pending review of the documents. However, Brazil will not reduce its production.

As the world’s fastest-growing oil producer, Brazil would add to the firepower of OPEC Plus, which already produces more than 40 percent of the world’s oil reserves. Brazil is South America’s largest oil producer and is expected to produce about 3.8 million barrels of oil per day next year, according to the International Energy Agency.

The meeting, initially scheduled for last weekend, was postponed, raising fears that consensus would be difficult to reach.

The choices offered were not attractive to oil executives. The question was essentially how much to restrict production and how to distribute the pain.

OPEC Plus has already made a series of production cuts to hold down prices over the last year, and there are few signs of relief in 2024.

Global oil demand is expected to slow sharply in 2024 amid an economic slowdown in China, the largest importer, and prospects of rapid growth for much of the global economy.

At the same time, analysts predict, the United States, Guyana, Brazil and other non-OPEC Plus producers will likely increase production to absorb the modest increase in demand.

With oil revenues essential to financing government budgets, national social programs and investment plans of many member countries, decisions on issues such as production caps are extremely sensitive.

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David B.Otero

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