Unlock the Editor’s Digest for free
Roula Khalaf, Editor of the FT, selects her favourite stories in this weekly newsletter.
Opec+ has cancelled its formal meeting in Vienna next week in favour of a video conference, in a sign that there may already be broad agreement for members to roll over existing oil production cuts.
Members of the extended oil cartel will now meet online, rather than in person, on June 2 to decide production policy for the second half of the year.
No reason was given for the shift, although some people in contact with delegates suggested that concerns over the health of 88-year-old King Salman of Saudi Arabia had contributed to the decision. Saudi energy minister Abdulaziz bin Salman, who chairs Opec, is the king’s son.
The group has only held two in-person gatherings since the start of the Covid pandemic.
The 22 members of Opec+, led by Saudi Arabia and Russia, made a similar switch last November, after disputes with African members about quotas that eventually led to Angola quitting the group.
This time discussions are predicted to be smoother. Most analysts expect Opec’s members to roll over for a second time a voluntary cut of 2.2mn barrels due to expire at the end of June, as they try to shore up prices against higher US production and an uncertain economic outlook in China.
The voluntary cut, introduced in November 2023, adds to 3.6mn b/d of production curbs that have reduced the group’s crude output by about 5.8mn barrels a day, or about 5 per cent of global supply, since November 2022.
“I think they are going to roll over the cuts,” said one person close to several Opec delegates. “I have heard that directly and indirectly from two members,” the person added.
The price of the benchmark Brent crude is near three-month lows, trading at just over $81 a barrel on Friday morning.
“The failure to hold on to the $90 handle, the preferred price for most Opec+ producers [means] an extension of the current production cuts at the June meeting will be the most likely outcome,” said Ole Hansen, head of commodity strategy at Saxo bank.
The production cuts, which began in November 2022 in the face of vehement US opposition, have helped support crude prices in the past 18 months but left Saudi Arabia, which has reduced its output by 2mn barrels a day, shouldering most of the cost.
Christyan Malek, head of global energy strategy at JPMorgan, said the current outlook for supply and demand left little room for Opec+ to increase production from July, adding that the group was more likely to conduct its review of members’ baseline production capacity at the end of June and then take a decision.
Oil production baselines are used by the cartel to set the levels from which production cuts are made.
Helima Croft, head of commodities research at RBC Capital Markets, agreed that a virtual rather than in person meeting “would seem to signal roll everything over and wait for the secondary source assessments before setting 2025 benchmarks”.
