Saudi Arabia, Some OPEC Members Clash Over Oil-Production Quotas
OPEC and its allies meet Sunday in Vienna to decide on an output plan
VIENNA—Saudi Arabia and some OPEC members clashed over who would produce how much oil ahead of a contentious group meeting on Sunday, people familiar with the matter said, in a sign of growing tensions within the cartel amid concerns over weakening global energy demand.
Saudi Arabia, the de facto leader of the Organization of the Petroleum Exporting Countries, demanded smaller African producers cut their quotas, according to the people. At the same time, the kingdom was in talks with the United Arab Emirates, another powerful member of the group, to allow it to produce more, they added.
Saudi Oil Minister Prince Abdulaziz bin Salman called some of the African delegates to his hotel suite in Vienna on Saturday and told them that their production quotas within the group would be reduced, the people said. They walked out of the meeting without a deal, the people added. African countries such as Nigeria and Angola have often struggled to even meet their current production targets for various reasons, including pandemic shutdowns that proved hard to reverse and years of underinvestment.
Representatives for the energy ministries of Saudi Arabia, the U.A.E., Nigeria, Angola, Equatorial Guinea, Gabon and the Republic of Congo didn’t immediately respond to requests for comment.
A production cut of up to 1 million barrels a day is on the table as OPEC and its Russia-led allies, known as OPEC+, meet this weekend in Vienna to decide on a production plan, delegates said. The broader 23-member group accounts for more than half the world’s oil production. The delegates said a cut in production is expected to prop up crude prices amid concerns that a slowing global economy would crimp energy demand. Still, most members don’t want to give up their allotted production quotas as that affects their overall revenues.
If approved, Sunday’s output cut would be the third by members of OPEC+ since October, when they slashed output by 2 million barrels a day. In April, some of the group’s largest members, including Saudi Arabia and Russia, cut a further 1.6 million barrels a day. The decision to cut had drawn rebuke from the U.S., which at the time had requested Saudi Arabia and OPEC to increase production to help tame inflation. It led to U.S. accusations that Riyadh was siding with Moscow in Russia’s invasion of Ukraine.
Brent crude, the international oil benchmark, is down more than 20% since OPEC and its allies first jolted the market with output cuts in October. Another output cut on Sunday isn’t expected to evoke any major reaction from Washington as most analysts expect that oil prices will continue to trend low.
This weekend’s OPEC+ meeting also comes amid growing tensions between two of the world’s biggest oil producers over previously agreed production cuts. Russia keeps pumping huge volumes of cheaper crude into the market that is undermining Saudi Arabia’s efforts to bolster energy prices, The Wall Street Journal has reported.
The latest available data indicates that Russia continues to pump large volumes of oil into the market, which has helped maximize income for its beleaguered economy but added to a global surplus, industry officials and traders say.
It remains unclear if Saudi Arabia will take any immediate action that would affect the energy alliance with Russia. Frictions between Riyadh and Moscow aren’t new to OPEC+. In March 2020, oil prices collapsed after Saudi Arabia and Russia failed to agree on an emergency plan to address a supply glut. After the disagreement, Saudi Arabia embarked on a price war in an attempt to grab market share from Russia. Beyond oil, Riyadh and Moscow’s partnership has yielded little so far when it comes to security cooperation, trade or investment.
OPEC delegates said that the cartel’s big production decisions are increasingly made by Abdulaziz often without consulting with other group members.
In recent months, Abdulaziz has been fixated on Wall Street short sellers, lashing out repeatedly this year against traders whose bets can cause prices to fall. Last week, he warned them to “watch out,” which some analysts saw as an indication that OPEC+ may reduce output at their June 4 meeting.
The focus on financial markets underscores the pressure facing the first Saudi prince to run the oil ministry. As his half-brother, Crown Prince Mohammed bin Salman, pursues his ambitious plans to reshape the kingdom’s oil-dependent economy, Abdulaziz must keep crude prices at a level that will make those efforts economically feasible.
“The prospects of seeing Brent below $70 per barrel is much more frightening than the prospect of a less balanced market,” said Viktor Katona, a senior analyst at data-commodities agency Kpler.
Saudi officials and other people familiar with Saudi oil policy say Riyadh is under pressure to maintain higher oil prices with its budget requiring an estimated $81 a barrel to break even. In recent months, Saudi economic advisers have privately warned senior policy makers that the kingdom needs elevated oil prices for the next five years to keep spending billions of dollars on ambitious projects that have so far attracted meager investment from abroad.