OPEC+ Not Expected To Alter Oil Production Policy Amid Price Rally

• Despite the recent oil price rally, OPEC+ is unlikely to alter its current oil production policy when the group meets this Friday.
• Since the last OPEC+ meeting in early June, oil prices have rallied more than 16%.
• The current OPEC+ cuts are due to last into 2024, with Saudi Arabia’s unilateral production cut currently expected to be extended into September.

A panel of OPEC+ is unlikely to change the current oil production policy of the alliance at the Friday meeting, several sources in the group told Reuters on Wednesday, as prices rallied to more than a three-month high. 

The Joint Ministerial Monitoring Committee (JMMC) of the group, which regularly discusses the situation on the market and the need for OPEC+ intervention, is meeting on August 4 to take stock of the most recent developments.

Since the OPEC+ meeting in early June, oil prices have rallied by more than 16%, driven by easing concerns about a U.S. recession and a tightening oil market thanks to the OPEC+ cuts.

At the latest meeting in June, OPEC+ decided to extend the current cuts into 2024. Those cuts were originally intended to last between May and December 2023. But the largest surprise came from Saudi Arabia, the world’s top crude oil exporter and OPEC+ leader, which announced a unilateral production cut of 1 million barrels per day (bpd) for July.

Early in July, the Saudis extended the cut into August, too, “to support the stability of the market.”

Now there are expectations that Saudi Arabia will extend its 1 million bpd production cut into September, too. The Kingdom is cutting its production by 1 million bpd in July and August, on top of around 500,000 bpd reduction as part of the OPEC+ cuts that began in May.

Some analysts expect Saudi Arabia to announce the one-month extension of the 1-million-bpd cut after the JMMC meeting on Friday and ahead of the announcement of the official selling prices (OSPs) for Saudi crude grades loading in September.   

The cuts from Saudi Arabia and some other OPEC+ producers, and signs that Russian crude shipments are already falling, have supported oil prices in recent weeks and led analysts to upgrade their forecasts for market deficits this quarter and the rest of the year.

By Tsvetana Paraskova for Oilprice.com

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