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OPEC’s 36th joint ministerial meeting in Vienna, scheduled for Nov. 26, has been postponed until Nov. 30, the group said on Nov. 22—an indicator that there are difficulties in reaching a consensus on production cuts, according to Rystad Energy.
Three OPEC+ sources said the disagreement was linked to African countries, Reuters reported. OPEC+ said after its last meeting in June that the 2024 output quotas of Angola, Nigeria and Congo were conditional on reviews by outside analysts.
Jorge León, Rystad senior vice president, said every member company acknowledged the need to reduce supply to support prices in 2024, but the question is “how to share the burden.”
“Our analysis shows that without further cuts, oil prices will remain close to $80 per barrel next year,” León said in a Nov. 22 report. “It's worth noting that a Ministerial meeting has been postponed before, but never for four days.”
Goldman Sachs said on Nov. 21 it expects Saudia Arabia and Russia to announce an extension of voluntary cuts through at least first-quarter 2024, with Brent crude prices $8/bbl lower than when the extended cuts were announced in September.
Goldman Sachs analyst Daan Struyven gave a 35% “subjective probability” that the group may make deeper cuts.
“Policymakers may take out insurance against the possibility that Brent drops below our $80/bbl estimate of the OPEC [output] in Q1 when demand is seasonably softer,” Struyven said. “A deeper group cut appears more likely than a deeper unilateral cut because only the former tends to boost revenues.”
However, León said a new production quota may prove challenging. The 2024 production quotas decided in June 2023 included a lower production target for nine of the 23 member countries, which are Russia, Nigeria, Angola, Malaysia, Azerbaijan, Equatorial Guinea, Congo, Brunei and Sudan, according to Rystad.
“It would be difficult for these countries to accept even lower production quotas,” León said.
Despite the challenges, Rystad still expects OPEC+ to reach an agreement to reduce production in the upcoming Ministerial meeting. That could require additional voluntary cuts by the United Arab Emirates, Kuwait and Iraq.
“However, we cannot completely rule out the possibility of a deadlock at this point,” León said.
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