June 20, 2024

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Opec+ weighs further oil production cuts as anger mounts over Gaza

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Saudi Arabia is preparing to prolong oil production cuts into next year as Opec+ weighs further reductions in response to falling prices and rising anger over the Israel-Hamas war.

After prices hit a four-month low of $77 a barrel this week, four people familiar with the Saudi government’s thinking said it was highly likely to extend its 1mn barrel-a-day cut at least until the spring.

The voluntary measure, due to expire at the end of this year, was introduced in the summer as a temporary step on top of wider cuts by the oil cartel. At present, Saudi Arabia produces about 9mn b/d, compared with a maximum of about 12mn b/d.

Further cuts, which could inflame tensions with the US, are under discussion by Opec+ as it prepares to meet in Vienna on November 26.

While the oil price drop is the main cause, members are also indignant at Israel’s war on Hamas and the humanitarian crisis in Gaza.

An additional Opec+ cut of up to 1mn b/d could be on the table, one informed person said, describing the cartel as “galvanised” by the conflict.

Kuwait, Algeria and Iran are among the Opec members most agitated by the conflict.

“You should not underestimate the level of anger there is and the pressure leaders in the Gulf feel from their populations to be seen to respond in some manner,” said another person close to senior Opec figures in the Gulf.

The person said there would be no repeat of the oil shock of the 1970s, when Arab states halted exports to the west. But they added: “People have become complacent about the potential to tighten oil supplies to send a subtle message, which will be well understood both in the streets and Washington DC.”

US President Joe Biden is facing a difficult re-election battle next year, possibly against his predecessor Donald Trump, and the White House is already struggling to convince voters that the country’s economy is healthy.


2023-11-17 13:27:38

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