VIENNA: Opec and its allies are unlikely to decide on further oil supply cuts at a meeting on Sunday (tomorrow) despite a fall in oil prices toward $70 per barrel this week, two sources from the alliance said on Friday although another said the outcome was still unclear.

Opec+, which groups the Organisation of the Petroleum Exporting Countries and allies led by Russia, pumps around 40% of the world’s crude, meaning its policy decisions can have a major impact on oil prices.

Two OPEC+ sources said they did not expect the group to agree further output cuts on Sunday, when OPEC+ ministers gather at 2pm in Vienna (1200 GMT). Before then, OPEC ministers will meet at 11am today.

Saudi Energy Minister Prince Abdulaziz bin Salman and his counterparts from Algeria and the United Arab Emirates are among those expected to arrive in Vienna later on Friday, sources said.

Russia continues contacts with members

As the economic outlook worsened, several members of Opec+ in April pledged voluntary cuts starting from May, adding to a 2 million barrels per day (bpd) reduction agreed last year.

Russia continues contacts with the members of the Opec+, Kremlin spokesman Dmitry Peskov said on Friday, before the group meets to make a decision on its production policy.

He declined to comment on the possible outcome of the meeting.

Western nations have accused Opec of manipulating oil prices and undermining the global economy through high energy costs.

In return, Opec officials and insiders have said the West’s money-printing over the last decade has driven inflation and forced oil-producing nations to act to maintain the value of their main export.

“We will never hesitate to take any decision to achieve more balance and stability (on) the global oil market,” Iraq’s oil minister Hayan Abdel-Ghani said on arriving in Vienna.

The surprise output announcement in April helped to drive oil prices about $9 per barrel higher to above $87, but they swiftly retreated, under pressure from concerns about global economic growth and demand. On Friday, international benchmark Brent was trading around $76.

Last week, Prince Abdulaziz said investors who were shorting the oil price should “watch out”, which many market watchers interpreted as a warning of additional supply cuts.

But Russian Deputy Prime Minister Alexander Novak subsequently said he did not expect any new steps from Opec+ in Vienna, Russian media reported.

The International Energy Agency expects global oil demand to rise further in the second half of 2023, potentially boosting oil prices.

Analysts at JP Morgan, however, said Opec had not acted quickly enough to adjust supply to a sluggish economic recovery and high levels of US fuel output.

“One thing is clear: the alliance waited too long to reduce supply. The alliance — or at least some members — would likely need to cut more,” analysts from JP Morgan said in a note.

Rapidan Energy Group analysts put the chances of a further cut at 40 per cent.

“Ministers are determined to avoid a repeat of 2008, when a sudden collapse in global economic and financial stability sent crude prices from over $140 to $35 in six months,” they wrote.

Published in Dawn, June 3rd, 2023