International oil prices experienced a decline on Wednesday following the unexpected postponement of a vital ministerial meeting by the Organization of the Petroleum Exporting Countries (OPEC) and its allies.
The meeting, initially scheduled for Sunday, has been rescheduled to November 30 without any detailed explanation provided by the Vienna-based organization.
The 13 OPEC members, led by Saudi Arabia, along with ten partners, including Russia, were set to decide on their output policy amidst concerns about falling crude prices and recent rumors of disagreements among alliance members.
After the sudden announcement, global crude prices dropped over five percent, stabilizing somewhat afterward.
As of 1630 GMT, Brent North Sea crude saw a 3.9% decrease to $79.27 a barrel, and West Texas Intermediate was 4.1% lower at $74.61.
“Uncertainty is never good for financial markets, which now have to wait longer to get clarity on what OPEC+ will do next year,” remarked UBS analyst Giovanni Staunovo.
The delay also indicates “different views among the group’s participants,” signaling potential difficulties in reaching an agreement, according to Jorge Leon of Rystad Energy.
Amidst plummeting oil prices, analysts anticipate further production cuts by the alliance.
However, the challenge lies in determining how these cuts will be implemented and shared among members in the coming year.
In recent months, nine OPEC+ members, including Riyadh, Moscow, Baghdad, and Dubai, have already reduced their output.
Saudi Arabia, in particular, voluntarily cut production by an additional million barrels a day since July, expressing discontent over the decline in prices.
Russian Deputy Prime Minister Alexander Novak offered a different perspective, stating that “current oil prices objectively reflect the current situation” and are at a sufficient level to balance the market.
The market will discuss these issues in detail at the rescheduled meeting, he added.
While oil prices are below the levels seen in September, they remain above the average of the last five years.
Concerns about demand, especially in China, the world’s largest importer of crude, persist.
For Saudi Arabia, the $80 mark is critical as it is slightly above the break-even price, according to IMF estimates.
In the absence of an agreement, there are concerns that Riyadh might cease additional cuts.
Fawad Razaqzada of City Index noted dissatisfaction from Saudi Arabia towards other OPEC+ members not complying with previously announced cuts.
Reports suggest that Russia is hesitant to implement commitments due to the need for oil revenue to finance its activities in Ukraine.
Additionally, disagreements between Riyadh and African countries over quotas have surfaced, with some members expressing a desire to increase production.
The complexity of these issues points to the challenges faced by OPEC+ in reaching a consensus.
While oil prices are below the peaks reached after the Russian invasion of Ukraine, they still surpass the average of the last five years.
However, concerns about demand, particularly in China, the largest global crude importer, persist.
The $80 per barrel mark is critical for Saudi Arabia, given that it is slightly above the break-even price, according to IMF estimates.
Investors fear that, in the absence of an agreement, Riyadh might cease additional production cuts.
Fawad Razaqzada of City Index highlighted Saudi Arabia’s dissatisfaction with OPEC+ members not adhering to previously announced cuts.
Reports suggest Russia’s reluctance to implement commitments due to the need for oil revenue to finance its war in Ukraine.
Additionally, disagreements between Riyadh and African countries over quotas add to the complexity of the situation, with some members expressing a desire to increase production.
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