The recent meeting of the Organisation of the Petroleum Exporting Countries and its partners (OPEC+) was expected to be a calm gathering, but instead, it turned into a heated debate. The meeting was pushed back and eventually moved online, which unveiled a disagreement between the big OPEC+ producers and the smaller ones. After agreeing to reduce output quotas in the previous meeting, OPEC+’s west African members were not pleased to hear that Russia and Saudi Arabia wanted further cuts. This led to one oil minister from Angola planning to boycott the in-person meeting.
As The Economist went to press, OPEC+ was preparing for an online meeting and considering modest additional cuts into 2024. This would be an extension of their strategy to resist downward pressure on prices by limiting supply. The current strategy includes cuts from Saudi Arabia and Russia, as well as the rest of OPEC+ contributing in cuts as well. Despite this, the price of Brent crude benchmark has dropped by around 15% and has fallen for the past five weeks.
The recent back-and-forth at the November meeting exposed the challenges OPEC+ faces. Oil price drops are influenced by expectations of slowing global demand and decreased geopolitical risk. The cartel has welcomed more countries, making it difficult to accommodate divergent interests. Not all members are following the output quotas, which adds to the challenges OPEC+ is facing.
The last time OPEC faced a similar situation in 2014, officials chose a different strategy of increasing supply to drive down oil prices and grab market share, which is no longer applicable. The current market-share strategy has helped discipline America’s oil producers, pushing them to become more efficient and resistant to future pressures.
Saudi Arabia and Russia are now hoping for a change in their luck as the recent strategy has not yielded favorable results. This situation highlights the complex dynamics within OPEC+ and the challenges they face in managing oil production and prices.
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Image: The Economist
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