In the aftermath of the recent drop in oil prices, OPEC+ is contemplating steeper production cuts, with speculation intensifying as Brent crude briefly touched $77 per barrel. The decision to delay the OPEC+ meeting until November 30 has only fueled the speculation, with deeper production cuts being considered. Despite strong oil demand this year, robust non-OPEC supply, particularly from the U.S., Brazil, Guyana, and Iran, has offset most of the OPEC+ cuts. The market appears relatively balanced, prompting OPEC+ ministers to weigh the options of extending existing cuts or implementing a more significant reduction. Saudi Arabia, which has been actively countering bearish sentiment throughout the year, may face challenges in persuading all OPEC+ states to agree on a unified approach, especially considering varying compliance levels and individual country interests within the alliance.
The most probable outcome in the upcoming decision is a rollover of existing cuts, potentially for the first half of 2024, including voluntary reductions from Saudi Arabia and Russia. This decision might be coupled with efforts to enhance compliance from certain member countries and a complex rearrangement of production targets. However, there remains the possibility that Saudi Arabia could push for a more substantial OPEC+ production cut, potentially up to one million barrels a day, a move that would raise questions about how long the kingdom is willing to act unilaterally to stabilize oil markets amidst competing interests within the alliance.