Saudi Energy Minister Prince Abdulaziz bin Salman recently countered a bearish view on the OPEC+ agreement, asserting that OPEC+ can pause or reverse oil production increases if market conditions deteriorate.
- OPEC+ Control: The agreement extends for a year and a half which allows OPEC+ to monitor market conditions and adjust production as needed.
What is OPEC+?
OPEC Plus refers to non-OPEC countries (10) that export crude oil in addition to the 12 OPEC member nations.
| OPEC Countries |
Non – OPEC Countries |
- Algeria, Gabon, Iran, Iraq, Kuwait, Libya, Nigeria, the Republic of the Congo, Saudi Arabia, the United Arab Emirates and Venezuela.
- Former Opec members: Angola, Ecuador, Indonesia, and Qatar
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- Azerbaijan, Bahrain, Brunei, Kazakhstan, Malaysia, Mexico, Oman, Russia, South Sudan, and Sudan.
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Key Players in the OPEC Plus Alliance
- Saudi Arabia and Russia: For the past three years, Saudi Arabia and Russia have played central roles in the OPEC Plus alliance.
- Alliance Objective: The alliance initially included 11 OPEC members and 10 non-OPEC nations, and it aimed to stabilize oil prices through coordinated production cuts.
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New OPEC+ Agreement Details
- Production Cuts: OPEC+ agreed on a complex deal to extend significant production cuts until 2025.
Current Cuts: The group is cutting output by 5.86 million barrels per day (bpd), approximately 5.7% of global demand.
- Voluntary Cut Phase-out: Several OPEC+ members, including Russia, decided to gradually eliminate voluntary cuts of 2.2 million barrels per day (bpd) over the course of a year, starting in October.
- OPEC+ also agreed to maintain other cuts of 3.66 million bpd until the end of 2025.
Why Some View the OPEC+ Agreement as Bearish for Oil Prices?
- Gradual Production Increase Seen as Bearish: The agreement to phase out additional production cuts of 2.2 million barrels per day (bpd) over a year is considered bearish because
- It can increase supply, which could weaken oil prices.
- Goldman Sachs Disagrees with OPEC+ Figures: Goldman Sachs used figures from OPEC+ to conclude.
- It was confirmed when the Saudi energy minister claimed Goldman Sachs based their bearish outlook on inaccurate figures but didn’t specify the discrepancies.
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| Goldman Sachs
The Goldman Sachs Group, Inc. is an American multinational investment bank and financial services company.
- Establishment: Founded in 1869.
- Headquarters: Located in Lower Manhattan, New York City.
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- Price Drop Attributed to Misinterpretation: Russia attributes the recent oil price decline to a misreading of the agreement and speculative trading, not to actual supply changes.
7 Jun 2024
