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Today, Sunday, in Austria, the OPEC Plus alliance is discussing a decision to cut new oil production with the aim of stabilizing oil prices, which have lost 40% of their value since the beginning of this year.
Iraq reduced its production in October 2022, by 220,000 barrels, and then joined the countries that voluntarily reduced their production, to reduce 210,000 barrels per day, bringing the total reduction to 430,000 barrels. While Iraq's share in OPEC is 4.65 million barrels per day, Iraq's production during the month of April reached 3.9 million barrels, which is much less than its share in OPEC, due to the suspension of exporting the oil of the Kurdistan region, as Iraq lost 500 thousand barrels per day.
OPEC Plus pumps about 40% of the world's crude oil production, and it is possible to reduce production by one million barrels per day, in addition to the current cuts amounting to 2 million barrels per day and voluntary cuts of 1.6 million barrels, so that the total reduction is 4.66 million barrels, which constitutes 4.5% of total global demand.
The Iraqi, Saudi, Emirati, Kuwaiti and Algerian oil ministers met, in particular, before the ministerial meeting, to crystallize the new agreement.
Iraq's production constitutes 11% of the production of the OPEC Plus coalition, and therefore any delay in implementing the agreement will affect prices negatively or positively.
According to sources I spoke to; The ministers are open to a scenario for a new reduction in production, bearing in mind that there is no agreement on a specific number for this reduction so far, especially since some countries that have made voluntary cuts do not express any desire to increase their cuts beyond what they have provided so far.
The sources added that “OPEC” will discuss today, Sunday, with the rest of the countries in the “OPEC +” alliance, presenting a collective cut that includes all countries to support market stability, as countries cannot proceed with the agreement without everyone entering into it. Among the ideas put forward; Converting voluntary cuts into mandatory ones, counting them as part of the new agreement, and inviting other countries to join them.
In the event that “OPEC” and its allies do not reach a new agreement to reduce production, the current agreement to reduce 2 million barrels per day and the voluntary reduction of about 1.6 million barrels per day will remain the only option, as work under these cuts is still valid until the end of the year.
The “OPEC +” alliance faces this year a wave of challenges on both sides of supply and demand, as economic growth in China continues to disappoint the market, while it is expected that the growth of production from outside the organization, especially from the United States, in which the number of drilling rigs declined for several consecutive weeks. .
The production cut scenario is considered a surprise to the market, as Goldman Sachs had previously issued expectations stating that OPEC would not cut its production, while the RBC bank said a few days ago that the organization might offer a slight cut in its production before the bank returned to increase its expectations. To reduce to about one million barrels per day, considering this scenario is the closest.
Added 06/04/2023 - 11:20 AM
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