For nearly 18 months, the OPEC+ cartel has been cutting its production to prop up oil prices. It’s worked to a degree, with external events helping, but it’s also opened the door to allowing the US to become by far the world’s largest oil producer.
After a virtual meeting on Wednesday, the joint monitoring committee of OPEC+ announced that the 1.3 million barrels a day of cuts agreed to last June and the additional 900,000 barrels a day of cuts announced late last year would remain in place until July.
Saudi Arabia’s Mohammed bin Salman. The kingdom has drastically reduced oil production, opening the door for the US. Credit: AP
Taking into account earlier rounds of reduced production that began in late 2022, more than 5 million barrels a day – almost 5 per cent of global supply – have been withdrawn from the market, or at least they would have been, had a number of OPEC+ members adhered to their quotas.
Those members who have been producing above their quotas – Iraq, Kazakhstan and the United Arab Emirates among them – will now have until April 30 to submit compensation plans. Iraq and Kazakhstan, at least, have pledged to conform to their quotas and compensate for their over-production by producing at rates below the levels allowed by those quotas.
With Iraq producing about 270,00 barrels a day above its quota in the first quarter, the UAE about 218,000 barrels a day above its target, and Kazakhstan about 92,000 barrels a day, that implies there could be further and significant reductions in output later this year – if the quota-dodgers honour their pledges.
The attempt to use reduced supply to put a relatively high floor under oil prices has had mixed success.
The mid-year cuts last year did drive the price up from below $US75 a barrel to almost $US100 a barrel by late September, but it was back below $US75 a barrel by early December, which prompted the last round of voluntary cuts.
It was still below $US80 a barrel in early February when Ukraine launched a major campaign targeting Russia’s refineries with mass drone attacks. Production at at least nine refineries appears to have been disrupted, impacting the processing of about a million barrels a day of crude.
How the US is exploiting the world’s oil cartel
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04.04.2024
For nearly 18 months, the OPEC cartel has been cutting its production to prop up oil prices. It’s worked to a degree, with external events helping, but it’s also opened the door to allowing the US to become by far the world’s largest oil producer.
After a virtual meeting on Wednesday, the joint monitoring committee of OPEC announced that the 1.3 million barrels a day of cuts agreed to last June and the additional 900,000 barrels a day of cuts announced late last year would remain in place until July.
Saudi Arabia’s Mohammed bin Salman. The........
© The Sydney Morning Herald
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