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Saudi Arabia has secured tentative support within the OPEC+ alliance for additional oil production cuts, causing a surge in oil prices to their highest level in three weeks ahead of a critical cartel meeting. The meeting, conducted online due to delays and heightened tensions from the Israel-Gaza conflict, signifies Saudi Arabia’s efforts to stabilize falling oil prices. The provisional agreement involves challenging negotiations with member countries reluctant to reduce supply. Saudi Arabia has issued a warning that it may reverse its voluntary cuts if others fail to contribute significantly, leaving oil markets in suspense pending the finalization of the deal.
Brent crude, the global benchmark, has experienced recent gains as traders anticipate a supply restriction deal. On Thursday, Brent reached $84.69 a barrel, the highest since early November. Sources familiar with Saudi Arabia’s stance suggest a potential group-wide production cut of around 1 million barrels per day, approximately 1% of global supply. The exact figure remains uncertain but could be subject to adjustment. The kingdom also contemplates extending its existing voluntary cuts, while Russia considers smaller voluntary export reductions.
Analysts caution that failure to solidify the production restriction deal may lead to a decline in oil prices, which have already retreated from near $100 a barrel in September due to global economic uncertainties and increased supplies outside the cartel’s quota system. The ongoing Israel-Gaza conflict has heightened tensions among OPEC members and western countries, with the US expressing concerns about rising prices affecting inflation control.
As the deal is still being finalized, the formal OPEC+ ministers’ meeting, including Russia, is expected to commence around 2:30 pm GMT. The outcome hinges on the willingness of other OPEC members, particularly African nations like Angola and Nigeria, to contribute to production reductions. The UAE, a key ally of Saudi Arabia within OPEC, is reportedly supporting the cuts after securing favorable baselines and output targets in June.
Against the backdrop of the Israel-Gaza war and concerns over rising prices, the negotiation process underscores the delicate balance between stabilizing oil markets and addressing geopolitical considerations. OPEC Secretary-General Haitham Al Ghais emphasized on Thursday that the oil industry is part of the solution to climate change, despite criticism from environmental activists over the influence of fossil fuel producers in global climate talks. The outcome of the OPEC+ meeting will significantly impact the trajectory of oil prices and the stability of the global energy market.
