(CTN News) – The market was caught off guard when OPEC postponed its meeting by four days, resulting in a 4% drop in Brent during a single trading session. Initially, investors feared a significant division among OPEC members, including key producers.
However, as more information emerged, it became clear that the disagreement over production quotas only involved smaller African members, such as Angola, Congo, and Nigeria. Despite the initial sell-off, the market has since stabilized.
Nigeria is considered the largest producer among the three nations and is believed to have a viewpoint that is closest to that of Saudi Arabia.
It should be noted that Nigeria had previously agreed to significant production cuts for 2023 in June of that year, with the condition that production quotas would be increased if surplus capacities could be demonstrated.
The postponement of Opec’s meeting is certainly significant,
As it is not a common occurrence. However, this delay may actually have a more positive impact on prices rather than a negative one. It indicates that the cartel, along with Russia, is not simply looking to prolong the current production cuts until 2024.
There is a real possibility that they may deepen the cuts from their current levels. The fact that the meeting has been pushed back a few days suggests that the major producers are actively strategizing to further reduce the supply, contrary to earlier expectations of a mere extension in production cuts.
It has been observed by impartial observers that in order for Saudi Arabia to implement its ambitious economic plans, the price of oil would need to exceed $90 per barrel for a significant duration.
The Kingdom has demonstrated its determination to maintain a “balanced” oil market by voluntarily reducing a substantial portion of its production to support prices.
Although US crude stockpiles have slightly increased, there have been minimal changes in the supply. According to the latest Opec monthly market outlook report, demand patterns have remained strong.
There is a growing likelihood that the cartel may implement a more aggressive production cut plan for 2024 unless they choose to immediately cut production for the rest of 2023. If production cuts are not intensified, oil prices could drop to their lowest levels in months.
The outcome of the November 30 OPEC meeting is eagerly awaited as it will have a significant impact on the crude oil market for the next two quarters.