OPEC+ suppliers struggle to build consensus on cuts to oil production even as prices tumble

The OPEC oil cartel led by Saudi Arabia and allied producers including Russia will try to agree Thursday on cuts to the amount of crude with prices having tumbled lately despite their efforts to prop them up. The OPEC oil cartel, led by Saudi Arabia and allied producers, including Russia, is set to deliberate on Thursday to reach an agreement on cutting crude production they send to the world. Despite efforts to bolster oil prices, recent declines have prompted discussions on how to adjust production levels. While lower oil prices benefit U.S. drivers, OPEC+ countries, reliant on oil income, face challenges in sustaining prices, exacerbated by uncertainties surrounding the Israel-Hamas conflict’s impact on oil flows.  Analysts expect OPEC+ to reach a consensus on production cuts, emphasising the acknowledgement among member countries of the need to support prices into 2024. However, challenges exist in determining production cuts among the 23 member countries, especially those that already accepted lower targets in the June OPEC+ meeting. Additionally, the extension of Saudi Arabia and Russia’s voluntary cuts beyond this year into 2024 remains a significant question. Russia wants more oil revenue as it faces Western sanctions but seeks to pour energy earnings into its war chest against Ukraine. The Saudis have to earn nearly $86 per barrel to meet their planned spending goals, according to the latest estimate from the International Monetary Fund. The Saudis are trying to fund an ambitious overhaul of the kingdom’s economy, reduce its dependence on oil and create jobs for a young population. But the international benchmark Brent crude has stayed in the low- to mid-$80 range in recent weeks, reflecting concerns about oversupply in a weakening global economy, which could weigh on the thirst for oil for travel and industry. Early Thursday, Brent rose 8 cents to $82.96 a barrel, while U.S. crude rose by 11 cents to $77.97 a barrel in electronic trading on the New York Mercantile Exchange. Lower oil prices have allowed U.S. gas prices to fall or stay steady since Sept. 19, AAA said. Gas is averaging just below $3.25 a gallon, the motor club said, down about 7% from a month ago. But that’s still higher than when President Joe Biden took office in January 2021, when prices were averaging about $2.40 a gallon. High inflation has been a political challenge for Biden going into the 2024 election, prompting him to say Monday that efforts to improve supply chains and reduce price pressures are a priority. White House national security spokesman John Kirby declined to address the possibility of OPEC+ reducing oil production. “The president is going to keep focusing, as he has been, on a healthy global market that’s properly balanced and that can continue to bring the price of gasoline down here in the United States,” Kirby told reporters at a briefing Monday. U.S. oil production has hit records as OPEC+ has cut back, with producers outside the group expected to keep leading global growth in oil supply next year, the International Energy Agency said in its November oil report. For instance, daily production in the U.S. averaged 13 million barrels a day in August, an increase of more than 1 million barrels from a year ago, according to the latest monthly figures from the U.S. Energy Information Administration. Now, the risk is growing that Saudi Arabia’s production cuts could reduce OPEC’s influence over oil supplies as other countries boost their output. “The kingdom is balancing the desire to keep prices high by limiting supply with the knowledge that doing so will lead to a further drop in overall market share,” Leon said. Meanwhile, fears the conflict between Israel and Hamas might spread throughout the region, creating a shock to the oil market, have not materialized, with the IEA noting that “there has been no material impact on oil supply flows from the war.” With inputs from AP.