Saudi Arabia, the top global oil exporter, is likely to extend its voluntary supply cuts into at least the first quarter of 2024 and possibly the first half, according to Amrita Sen, co-founder of consultancy firm Energy Aspects. Sen stated on Wednesday that current oil prices do not warrant a deeper reduction in supply cuts for 2024, as market fundamentals remain strong. The Organization of the Petroleum Exporting Countries and their allies, collectively known as OPEC+, will convene for their ministerial meeting on Nov. 26 to assess the market outlook.
Brent prices experienced a slight dip, hovering just below $82 a barrel on Wednesday. Despite ongoing concerns about economic growth and demand, the market has been supported by supply cuts from OPEC+ and regional conflicts in the Middle East. The International Energy Agency (IEA) raised its oil demand growth forecasts for the current year and the next, despite slower economic growth in major economies.
Sen highlighted the recent removal of sanctions on Venezuela by Washington, which is expected to enhance heavy oil supplies to the U.S. and Europe, potentially affecting China. Meanwhile, oil from Russia and Iran continues to be exported despite sanctions. Sen pointed out the challenge in U.S. policies, stating, “They do want to reduce revenues for Russia without disrupting flows.”
The U.S. Treasury Department took a significant step by sending notices to ship management companies on Friday, seeking information about 100 vessels suspected of violating Western sanctions on Russian oil. This move follows the imposition of a price cap by Washington and its allies, aimed at restricting oil revenues in response to Moscow’s invasion of Ukraine.
Regarding Iran, Sen noted a production increase of approximately 600,000 barrels per day, with the OPEC producer exporting record volumes of oil to China. As global oil dynamics continue to evolve, the upcoming OPEC+ meeting will play a crucial role in shaping the trajectory of oil supply and prices into 2024.