On Monday, Iran's OPEC+ representative stated that OPEC+ has very little room to reverse its oil production cuts, which have triggered a supply surge in the U.S. shale oil industry.
"This price support strategy has actually encouraged countries outside the group to increase supply, especially the U.S.," said Afshin Javan, Iran's OPEC governor, in an article published by the official Shana news agency. "This has created very limited room for OPEC+ to ease production restrictions," he said.
This article is an unusual criticism of the group's policy from one of OPEC's founding members. Days later, OPEC+ will meet to discuss plans to restore production cuts. Javan also wrote that some smaller African member countries, including Gabon and Congo, may withdraw from the group as they are unable to pay membership fees.
OPEC+ is an alliance composed of OPEC countries such as Saudi Arabia and non-member countries led by Russia, seeking to restore production cuts made since 2022 but has been forced to delay its plans for increased production amid falling oil prices.
Javan warned that the planned increase in OPEC+ could lead to a supply surplus in 2025.
He wrote that the production cuts by the alliance over the past four years have fueled the surge in U.S. shale oil production. Since 2020, U.S. shale oil output has climbed by 2 million barrels per day.
Javan added that the "bleak demand outlook" from the largest oil-consuming countries complicates the challenges faced by OPEC+.
"This year, demand for OPEC crude may decline," he wrote. His assessment sharply contrasts with the forecasts of the research department based in Vienna, which expects continuous growth in demand for the group's output.
Iranian Oil Minister Mohsen Paknejad stated the same day that Iran will strive not to accept restrictions on oil production quotas.
According to representatives, OPEC+ plans to hold an online meeting this weekend instead of the previously planned in-person meeting.
This is the third consecutive time the alliance has shifted a meeting originally scheduled to be held at its Vienna headquarters to an online format. Anonymous representatives did not provide a reason for changing the format of the December 1 meeting, although this shift had been anticipated days in advance.
Major OPEC+ member countries need to decide at the meeting whether to continue pushing for a gradual restoration of halted oil production plans, which they have already delayed twice. These countries were supposed to gradually restore 2.2 million barrels per day starting in January, but this plan has been postponed since October due to low oil prices.
Since early July, Brent crude futures have fallen 15% due to weak Chinese demand and expanding U.S. supply, dropping below $75 per barrel, a price that is insufficient for the government spending of Saudi Arabia and many other OPEC member countries. The International Monetary Fund estimates that Saudi Arabia needs oil prices close to $100 per barrel to meet its ambitious transformation plans.
A Bloomberg survey last week showed that traders and analysts are questioning OPEC+'s plan to increase production next year as scheduled. Citigroup and JPMorgan forecast that the upcoming supply glut is enough to push oil prices towards $60 per barrel. They warned that if the group "turns on the taps," oil prices could fall further.
Since the outbreak of the Russia-Ukraine conflict in early 2022, OPEC+ has only held two meetings in Vienna, an event that has damaged Moscow's political relations with the EU and other countries. Most of the group's meetings have been online since the COVID-19 pandemic.
At the last meeting of OPEC+ in June, Saudi Arabia only extended an invitation to the other 7 member countries participating in the production cuts to gather at the Ritz Hotel in Riyadh at the last moment.
Article forwarded from: Jinshi Data