Officials from major oil-producing countries met in Riyadh on Sunday to address the delicate balance of oil supply and demand in the global market. The group, known as OPEC Plus, led by Saudi Arabia and Russia, aimed to reassure markets that they would continue to limit oil supplies while also offering hope to producers like the United Arab Emirates that they may soon be able to increase production.
The deal reached in Riyadh is complex, with deep production cuts set to extend through next year. However, a gradual phase-out of some cuts will allow certain countries, including Saudi Arabia, the United Arab Emirates, and Iraq, to gradually increase output in monthly increments through 2025.
Despite the intricacies of the agreement, some analysts believe it may not be enough to address the oversupply of oil in the market. Gary Ross, a veteran oil analyst, expressed skepticism about the deal’s ability to reassure investors already uneasy about oil prices.
Since late 2022, OPEC Plus has implemented output trims to support oil prices, with most countries complying with the program. However, some countries, like the United Arab Emirates and Iraq, have exceeded their agreed production limits, leading to tensions within the group.
The United Arab Emirates, in particular, successfully negotiated a 300,000-barrel-a-day increase to its official ceiling, reflecting its efforts to expand its oil production capacity. The country’s frustration with production limits that do not align with its capabilities highlights the challenges faced by oil-producing nations in balancing market demands and domestic priorities.
As oil prices hover around $82 a barrel, producing countries are eager to see higher prices to support their development and social programs. Saudi Arabia’s decision to offer a portion of Saudi Aramco’s shares in a bid to raise additional funds underscores the financial pressures faced by oil-producing nations in the current market environment.
