Ahead of the already once-delayed OPEC+ virtual meeting tomorrow – which may or may not be delayed again – the leaks, trial balloons and outright manipulation by various cartel delegates is approaching a level that would make the Fed and ECB blush.
In the latest such leak, moments ago the WSJ largely repeated what we already reported last week, namely that to halt the drop in oil price, most OPEC+ members are considering – and in favor of – an additional 1 million barrels per day production cut. And while delegate sources confirmed that Nigeria and Angola, the two biggest African oil producers, still resist a downgrade of their individual quotas, as does the United Arab Emirates, Saudi Arabia is in favor of the new cuts. And what Saudi Arabia wants, it usually gets.
The move, which would likely send oil prices higher, could be announced Thursday at a virtual meeting of the cartel, although a deal for further cuts isn’t assured, and the prospect is still facing significant resistance.
As a reminder, Saudi Arabia in June cut production by 1 million barrels, in a unilateral move as part of a deal with the other members of the Vienna-based group. Any cuts announced Thursday would be in addition to those announced in June, and would likely draw a rebuke from the U.S., which slammed 13-strong OPEC and its 10 Russia-led allies for agreeing to a cut of 2 million barrels a day last year. The White House – which is terrified of a spike in gasoline prices in the 2024 election year realizing it would all but cement Joe Biden’s loss next November, called the decision by the so-called OPEC+ alliance shortsighted and suggested the group was actively supporting Russia’s invasion of Ukraine.
Separately, the WSJ reported that the delegates said the Middle East conflict hadn’t been brought up in the OPEC conversations.
The OPEC talks also come as global industry and political leaders arrive in Dubai for the United Nations climate summit, where the role of major oil-producing countries in reducing emissions will again be a major topic of discussion. As a reminder, the UAE continues to push against further cuts and thus the fact that Saudi Arabia arranged for the OPEC meeting to take place at the same time as the climate summit suggests that Riyadh is not very pleased with its neighbor.
Brent oil, the most widely traded contract, was down since the Oct. 7 middle-east turmoil by 7% to about $82 a barrel. Saudi Arabia, which has embarked on an ambitious program of projects, including a giant new city in the desert, needs a fiscal break-even oil price of as much as $88 a barrel, according to Goldman Sachs.
Oil reacted to the latest OPEC+ meeting trial balloon news by first spiking, then sliding as traders assumed that the news had already been leaked earlier explaining the bounce since the 10am ET DOE report of rising inventories, before rising near session highs again.