Responding to the moves, oil prices rose around 3% in early Monday morning trading, before paring their gains to more than 2%, with Brent crude hitting around $77.8 a barrel and crude American about 73.5 dollars.
What are “OPEC” and “OPEC+”?
The countries of Iraq, Iran, Kuwait, Saudi Arabia and Venezuela established OPEC in 1960 in Baghdad to coordinate oil policies and ensure fair and stable prices. It now includes 13 countries, mainly from the Middle East and Africa, and produces around 30% of the world’s oil.
In late 2016, OPEC formed what is known as the OPEC+ alliance with ten of the world’s largest non-organization oil exporting nations, including Russia, in late 2016.
What are the new resolutions?
At its Sunday meeting, the coalition decided to extend production cuts of 3.66 million barrels per day, equivalent to 3.6% of global demand, until the end of 2024, in the part of a wider agreement on production policy reached after seven hours of talks. .
The production cuts, which include the 2 million bpd agreed last year, and a voluntary cut of 1.66 million bpd in April, were only to last until the end of 2023.
In addition, the OPEC + coalition has decided to reduce the total production target of the countries of the group, by 1.4 million barrels, to reach forty million and 460 thousand barrels per day, from next January 1 until the end of 2024.
The reduction in the production target – which is taken as the baseline for each country and therefore production is reduced or increased – compared to the targets for the current year, and aligned with the current actual production levels of countries.
Based on this adjustment of production targets, the target production plan ceiling for Russia has been reduced by 650,000 barrels, Angola by 175,000 barrels and Nigeria by 362,000 barrels per day next year. while the cap on production plans for the UAE has been raised by two hundred thousand barrels per day.
Extra Saudi Cup
In addition to the cuts announced by OPEC+, Saudi Arabia has announced the availability of an additional temporary voluntary cut of one million barrels per day, starting next July 1, for a period of one month. , which can be extended, meaning total voluntary cuts for the Kingdom will reach 1.5 million barrels in July.
Saudi Energy Minister Prince Abdulaziz bin Salman said in his statements that the decision to cut production is a “precautionary measure” to support stability in the oil market.
For his part, engineer Abdulaziz Al-Moqbel, a writer specializing in the oil industry, said in an interview with Sky News Arabia on Monday, that the decisions to cut production by OPEC + and Saudi Arabia are aimed at to find a balance and restore confidence in the oil markets.
He added that the oil group aims, through these decisions, to hedge against significant and uncertain economic changes that adversely affect the global economy, and to achieve a balance of oil supply in a way that responds to the needs of the request.
He pointed out that OPEC+ decisions also confirm that the group is responsible for managing the oil market and its balance, and “not financial derivatives in the oil market, or pumping from stocks”.
Independent production assessment bodies
OPEC+ intends to use independent parties to assess production levels and capacities in the coalition countries, to end the previous controversy over production data, it said. the Saudi Minister of Energy.
The Minister indicated in his statements that the issue of Russia’s oil production was discussed at the OPEC + meeting in Vienna, in order to clarify its data and strengthen the concept of transparency among the members of the group.
In this context, the Minister of Energy of the United Arab Emirates, Suhail Al Mazrouei, underlined the importance of having a very transparent mechanism to manage the capacity of each country in an equitable way, since some countries are experiencing a drop in the production, while other countries increase investment to increase their production capacities.
Al-Moqbel said in his statements to “Sky News Arabia” that the use of independent parties to determine actual field capacities, production levels and capacities, is a new mechanism, which will help end the the discussion on this subject, and specifically clarifies the geological and production data for each country of the alliance.
White House Commentary
Commenting on OPEC+ decisions, a White House official said yesterday that US President Joe Biden’s administration was focused on oil prices, “not barrels.”
The official, who asked not to be named, told Reuters: “We are focused on prices for US consumers, not barrels (barrels of oil), and prices have come down significantly since last year. .”
“As we have said, we believe that supply must meet demand and we will continue to work with all producers and consumers to ensure energy markets support (US) economic growth and declining prices for American consumers,” he added.
Read the Latest World News Today on The Eastern Herald.
