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The OPEC+ alliance has once again cracked down on the group's compliance with oil production cuts and pushed for a three-pronged plan for formal and voluntary cuts.
Two OPEC+ representatives could only comment anonymously due to the sensitive nature of the negotiations. .
One source said Russian oil barrels were subject to sanctions from Western countries and were transported via shadow fleets in lower visibility, sometimes exceeding quotas set out in the alliance's official policy.
Eight OPEC+ members, including major Saudi Arabia, will begin returning 2.2 million barrels per day of voluntary production cuts to the market in October. Earlier this month, they postponed the phase-out until December. OPEC+ countries are implementing two more production cuts: according to official policy, their output will total 39.725 million barrels per day next year. The eight member countries mentioned above will each cut production by a further 1.7 million barrels per day during 2025, also on a voluntary basis.
Non-compliance has been a bane of the OPEC+ alliance, casting a shadow over the credibility of its intentions to cut output – amid market uncertainty heightened by war in the hydrocarbon-rich Middle East, a recent stock sell-off and a fragile oil price backdrop. International – COVID-19 recovery in China, the world's largest crude oil importer.
Oil prices have been depressed for much of the year and fell sharply on Thursday. British “Financial Times” report Saudi Arabia, the de facto leader of OPEC+, said it was prepared to endure a low-price environment and abandoned its unofficial price target of $100 a barrel to boost production after December.
At 2:30 pm London time, Brent crude oil futures expiring in November were trading at $71.44 a barrel, down 0.17% from Thursday's settlement price. The front-month WTI November contract on the New York Mercantile Exchange was at $67.75 a barrel, unchanged from the previous day's closing price.
Carole Nakhle, founder and CEO of Crystol Energy, said in an interview with CNBC's Dan Murphy: “When Saudi Arabia sends a warning to cheaters within OPEC, I will read more of it.
Speaking about the group's likely approach to price targets, Nachler added, “Of course, higher is better for them, but nothing is set in stone yet.”
OPEC+ ministers, including Saudi Arabia's Prince Abdulaziz bin Salman, have previously insisted their policy is aimed at global stock reductions rather than clear prices, although in the longer term , decisions to tighten supply typically provide support for crude oil futures. But some members, including the Kingdom of Saudi Arabia, have propped up their annual budgets under balanced fiscal assumptions – the International Monetary Fund estimates Riyadh must reach $96.20 this year to meet its obligations.
Riyadh is embroiled in a broad and costly plan involving 14 gigabit projects, including future desert development Neom, as part of Saudi Crown Prince Mohammed bin Salman's drive to diversify the economy away from reliance on hydrocarbon revenues. Ambition.
An OPEC+ source told CNBC that despite economic pressure to implement the Vision 2030 plan, Saudi Arabia has not changed its OPEC+ approach or set a clear oil price target, noting that Riyadh could reshape its budget or disclose Support the budget through alternatives.
Earlier this month, Saudi Arabia's Investment Minister Khalid Al-Falih dismissed lingering doubts about the kingdom's plans to diversify the economy and touted “green-backed” investment opportunities to attract foreign financing.
The prospect of Saudi Arabia using its vast production capacity to resolve the OPEC+ dispute is not unprecedented. Back in 2020, after the sudden but brief dissolution of the OPEC+ alliance, Riyadh and Moscow engaged in a week-long price war amid already oversupply and drying up demand amid the spread of the Covid-19 pandemic. The market saw a massive influx – and briefly pushed WTI futures into negative territory.
OPEC+ receives monthly production data from seven independent secondary sources, which helps it calculate member countries' compliance. The alliance's Joint Ministerial Monitoring Committee, a technical group responsible for overseeing OPEC+ compliance, is scheduled to hold its next meeting on October 2.