Organization of the Petroleum Exporting Countries (OPEC) and its allies, led by Russia, plan to convene their first Joint Ministerial Monitoring Committee (JMMC) of 2024 in early February, although the specific date has not yet been determined, according to three sources within the alliance.
These meetings, held every two months, serve to monitor the implementation of production agreements.
The JMMC includes key countries such as Saudi Arabia, Russia, and the United Arab Emirates (UAE).
In its last full ministerial meeting on November 30, OPEC agreed to voluntary output cuts of approximately 2.2 million barrels per day (bpd) for the current quarter, with Saudi Arabia extending its existing voluntary cut.
The upcoming February meeting will assess the deal’s implementation in January. Angola recently announced its departure from OPEC, citing a focus on membership status rather than serving the group’s business interests.
If Angola follows through with its exit in January 2024, it will be the third country to leave OPEC, following Ecuador in 2020 and Qatar in 2019.
Reports suggest that the decision is influenced by disagreements with Saudi Arabia, which is perceived to be out of touch with global corporate, financial, and political developments.
Oil prices surged as much as 8% at the open after OPEC+ announced it was slashing output by 1.16 million barrels per day.
Brent crude futures last jumped 5.07% to $83.95 a barrel on that news, and U.S. West Texas Intermediate crude futures soared 5.17% to $79.59 a barrel.
The voluntary cuts will start from May to end 2023, Saudi Arabia announced, saying it was a “precautionary measure” targeted toward stabilizing the oil market.
The move comes on the back of Russia’s decision to trim oil production by 500,000 barrels per day until the end of 2023, according to the country’s Deputy Prime Minister Alexander Novak.
Other member states have also pledged respective cuts, with OPEC Kingpin Saudi Arabia reducing 500,000 barrels per day and UAE cutting 144,000 barrels per day, amongst other cutbacks from Kuwait, Oman, Iraq, Algeria and Kazakhstan.
“The selected involvement of the largest OPEC+ members suggest that adherence to production cuts may be stronger than has been the case in the past,” Commonwealth Bank of Australia’s Vivek Dhar said in a note.
Oil at $100 per barrel?
“OPEC+‘s plan for a further production cut may push oil prices toward the $100 mark again, considering China’s reopening and Russia’s output cuts as a retaliation move against western sanctions,” CMC Markets’ analyst Tina Teng told CNBC.
Teng noted, however, that the cut could also reverse the decline in inflation, which would “complicate central banks’ rate decisions.”
In March, oil prices tumbled to their lowest since December 2021, as traders feared the banking rout could dent global economic growth.
“They’re looking into the second half of this year and deciding they don’t want to relive 2008.” Bob McNally, Founder of Energy Aspects noted.
The oil cartel and its allies are looking to avoid a repeat of the 2008 crash, one analyst said.
“They’re looking into the second half of this year and deciding they don’t want to relive 2008,” said Bob McNally, president of Rapidan Energy Group, citing oil prices crashing from $140 to $35 in six months in that year.
McNally added that while it’s not his base case, oil prices could “make a dash for $100 … if Chinese demand goes back to 16 million barrels a day second half of this year [and] if Russian supply starts to go off because of sanctions and so forth,”
“Then these cuts, if they stick with them, are going to super tighten the market,” he said.
According to Wood Mackenzie, China could make up 40% of the world’s demand recovery in 2023.
Gold prices slid on Monday after a surprise announcement from OPEC+ about a cut to oil output sparked inflation concerns and raised bets of an interest rate hike at the U.S. Federal Reserve’s upcoming May meeting.
Spot gold was down 0.8% at $1,951.37 per ounce, as of 0401 GMT, its lowest in nearly a week. U.S. gold futures shed 0.9% to $1,968.20.
The opportunity cost of holding non-yielding bullion rises when interest rates are increased to lower inflation.
Gold has fallen “as investors weigh up the lure of gold as a safe-haven asset, versus the potential for higher-for-longer interest rates. Clearly, fears of inflation and higher interest rates has won the argument,” said Matt Simpson, senior market analyst at City Index.
Oil prices surged after Saudi Arabia and other OPEC+ oil producers announced a round of output cuts, a potentially ominous sign for global inflation just days after a slowdown in U.S. price data had boosted market optimism.
U.S. consumer spending rose moderately in February and showed signs of cooling, even though it remained elevated.
“Gold is now vulnerable to a move down to $1,900, given the potential for a higher terminal Fed rate that markets are currently pricing in,” Simpson added.
and made greenback-denominated bullion expensive for overseas buyers.
ANZ, in a note, observed gold’s “safe haven demand easing as the U.S. banking turmoil eased.”
Bullion had risen by nearly 8% last quarter after the recent global banking turmoil drove bets that the Fed would tone down its rate hike approach.
Standard Chartered analyst Suki Cooper said in a note that gold buying by central banks might not be as strong as it was in 2022.
Spot silver dropped 2.1% to $23.56 per ounce, platinum lost 1% at $981.89, and palladium slipped 0.7% to $1,449.94.
The governor of the Bank of Ghana (BoG), Dr. Ernest Addison, has stated that controlling fuel prices is a bad strategy.
There have been calls for the government to intervene and cap the prices of fuel to cushion consumers.
But speaking at the 108th MPC press briefing in Accra on Thursday (6 October), Addison said, “Capping fuel prices is not an innovation. In fact, it is a wrong policy. When you have fuel prices rising and you also have a budget deficit problem, who is going to pay for the difference in the cost of fuel?”
“That will create further fiscal subsidies and worsen your fiscal deficit problem that we are all trying to resolve. So on the contrary, we should really be pushing towards full cost recovery to minimize the burden on the budget,” he added.
Oil prices held near three-week highs on Thursday after OPEC+ agreed to tighten global crude supply with a deal to cut production targets by two million barrels per day (bpd), the largest reduction since 2020.
Brent crude futures edged down 16 cents, or 0.2%, to US$93.21 per barrel by 1020 GMT after settling 1.7% up in the previous session.
U.S. West Texas Intermediate (WTI) crude futures lost 14 cents, or 0.2%, to US$87.62 after closing 1.4% up on Wednesday.
Some of the world’s top oil-producing countries have agreed to cut the amount they export in a decision expected to raise petrol prices around the world.
Members of Opec+ – a group that includes Saudi Arabia and Russia – said they would slash production by two million barrels per day.
The group said it wanted to stabilise prices, which have fallen in recent months as the world economy slows.
But the decision raised fears that prices for motorists will climb.
Expectations that countries were planning to pump less had already pushed oil prices higher this week, including by almost 2% to more than $93 a barrel on Wednesday.
A spokesman for the RAC motoring group said the reduction announced Wednesday would “inevitably” lead to higher oil prices, forcing up the wholesale cost of fuel.
“The question is when, and to what extent, retailers choose to pass these increased costs on at their forecourts,” spokesman Simon Williams said.
It comes despite pleas from the US and others to pump more, after oil prices spiked this spring when the war in Ukraine disrupted supplies.
In a statement, the White House said US President Joe Biden was “disappointed by the short-sighted decision”. The US pledged to continue to release oil from national stockpiles “as appropriate” and look at other ways to try to rein in prices at the pump.
The move is also likely to disrupt US-led efforts to set a price cap for oil from Russia, a plan the US had suggested as a way to limit money flowing into the country and being put toward military use.
Opec members defended their decision as a response to significant “uncertainty” about future demand for oil, amid fears that the global economy is headed to a recession.
“The decision is technical, not political,” United Arab Emirates Energy Minister Suhail al-Mazroui told reporters as Opec+ members gathered in Vienna to discuss the plans.
President Joe Biden is “disappointed” that the Saudi-led OPEC+ oil cartel agreed to cut output by 2 million barrels per day, the White House said Wednesday, as the threat of rising gas prices, looms weeks ahead of critical midterm elections.
The decision by the grouping of major oil producers rebuffed heavy lobbying from US administration officials and prompted Biden to say he was concerned about the move. It reversed a small increase in output OPEC+ announced shortly after Biden visited Saudi Arabia for a conference in July.
Still, the White House insisted that the visit was not a “waste of time,” even as it sharply criticized the decision to cut production.
“The President is disappointed by the shortsighted decision by OPEC+ to cut production quotas while the global economy is dealing with the continued negative impact of Putin’s invasion of Ukraine,” said two of Biden’s top aides, national security adviser Jake Sullivan and National Economic Council Director Brian Deese, in a statement.
“At a time when maintaining a global supply of energy is of paramount importance, this decision will have the most negative impact on lower- and middle-income countries that are already reeling from elevated energy prices,” the two advisers wrote.
The administration will “consult with Congress on additional tools and authorities to reduce OPEC’s control over energy prices,” the statement read, without specifying which actions are under consideration to dampen the oil cartel’s sway.
Slashing oil production just ahead of November’s midterm elections poses a potential political problem for the President, who has touted this summer’s decreasing gas prices as he works to promote his agenda. The average gas price has been rising nationally again in recent days, according to AAA.
Departing the White House on Wednesday, Biden said he was concerned about the possibility of a significant cut to production.
“I need to see what the detail is. I am concerned, it is unnecessary,” he said in response to a question about the OPEC+ decision as he departed the White House for Florida, where he was set to tour storm damage.
The international cartel of oil producers held a critical meeting Wednesday, where energy ministers decided to slash production by 2 million barrels per day, the biggest cut since the start of the pandemic.
For the past several days, Biden’s senior-most energy, economic and foreign policy officials had been lobbying their foreign counterparts in Middle Eastern allied countries including Kuwait, Saudi Arabia, and the United Arab Emirates to vote against cutting oil production.
When he visited Saudi Arabia in July, Biden sought to make clear it wasn’t solely to ask the oil-rich kingdom to increase its oil output. After decrying the regime’s human rights record as a candidate, Biden fist-bumped the powerful Crown Prince Mohammed bin Salman, who US intelligence has said masterminded the murder of Saudi journalist and US resident Jamal Khashoggi.
Speaking on Fox News shortly after the decision was announced, National Security Councilcommunications coordinator John Kirby said the oil cartel was “adjusting back their numbers down a little bit” after making a small increase after Biden’s visit.
“OPEC+ has been saying and telling the word they’re actually producing 3.5 million more barrels than they actually are. So in some ways this announced decrease really gets them back into more alignment with actual production,” Kirby said, noting there hadn’t yet been dramatic shifts in the price of oil.
“We have to see how it plays out over the long term,” he said.
Kirby said Biden’s visit to Jeddah, Saudi Arabia, for a regional conference “was not about oil.”
“It was about larger national strategic and national interest goals throughout the region to try to foster a more integrated cooperative region,” he said.
The Organization of the Petroleum Exporting Countries and its allies, a group known as OPEC+, have agreed to cut oil output by 10 million barrels per day (bpd) in May and June.
That’s according to a statement released by the group.
The move according to analysts is designed to help prop up petrol prices, which have been battered by the Coronavirus pandemic.
OPEC+ said the cuts would be eased between July and December to eight million bpd, and the reductions would then be relaxed further to six million bpd between January 2021 to April 2022.
The group said it would hold another video conference meeting on June 10 to assess the market. But it did not mention the conditions for countries outside the grouping to reduce oil output.
Earlier on Thursday, the mega players were seeking to convince Mexico to join in a deal to implement record oil cuts to lift crudes prices battered by the coronavirus crisis, an OPEC source told Reuters news agency.
OPEC+ ministers were trying to persuade Mexico to cut its output by 400,000 bpd based on the country’s output level in October 2018, as part of broader cuts.
A worldwide lockdown to slow the spread of the coronavirus pandemic has cut fuel demand by roughly 30 percent and contributed to a crash in prices that took major benchmarks down by more than two-thirds before they recovered in recent days in anticipation of action from oil producers.
In Ghana, fuel prices have reached very low levels for some time now, and it is projected to go further down.
Prices of Brent crude is presently going for US$31.48 on the world market.
A gallon of petrol is now going for the average of GHS18 instead of the previous GHS23.
