Saudi Arabia and Russia, pillars of the OPEC+ alliance of oil exporting countries, announced on Sunday March 3 that they would extend their voluntary production cuts until mid-2024, in an attempt to support the price of a barrel. .
Saudi Arabia will continue to reduce its production by one million barrels per day (bpd) for the period from April to June, its energy ministry announced, cited by the official Saudi press agency SPA. Russia also reported an extension of the decline to the tune of 471,000 barrels per day, affecting both production and exports.
Despite a smaller share in the federal budget than before the start of the war against Ukraine in February 2022, the financial windfall from the sale of hydrocarbons remains essential for Moscow, at a time when its economic activity is focused on war effort to support its military actions.
In the cases of Riyadh and Moscow, these measures are in addition to the reduction of 500,000 bpd announced in April 2023 and which runs until the end of 2024. Among the twenty-three members of the alliance, other countries, like Kuwait, must also extend their cuts, on a smaller scale. This coordinated strategy was unveiled in spring 2023 for a total of 1.6 million bpd, before being reinforced by the additional effort of Moscow and Riyadh.
Fragile unity within OPEC
In anticipation of this new extension, oil prices jumped on Friday, with the American West Texas Intermediate (WTI) occasionally rising above $80, a first since November. A barrel of North Sea Brent reached a one-month high and ended with a gain of 2%, at $83.55. But it remains far from its short-lived surge to nearly 100 dollars at the end of September and especially from the 140 dollars reached following the Russian invasion of Ukraine.
OPEC, which brings together thirteen members under the leadership of Riyadh, chose to form an alliance in 2016 with ten other countries, including Moscow, in the form of an agreement called OPEC+, with the aim of limiting supply and to support prices in the face of the challenges posed by American competition.
However, for almost a year now, Saudi Arabia has ignored the unanimity of the members, for lack of agreement. The unity of the organization is wavering, to the point that Angola announced in December that it was withdrawing from the alliance, precisely against a backdrop of discord over its quotas.
The group’s next ministerial meeting, scheduled at the organization’s headquarters in Vienna on March 1er June, will be a new test of his unity. During this meeting, OPEC+ must set its production target for 2025.