Brent crude falls to $78 following OPEC meeting postponement

Brent crude price fell to $78 per barrel following OPEC meeting postponement. On Wednesday, November 22, the Organization of Petroleum Exporting Countries (OPEC) announced that the meeting of oil producers which was scheduled to take place on November 26 has now been postponed to November 30.

After the announcement, Brent crude price dropped to $78 per barrel, as of 3:40 PM, GMT+1, Brent crude was $78.86, after OPEC confirmed that it had indeed postponed the highly anticipated meeting. Note that Brent crude was at $98 per barrel as of late September 2023.

Meanwhile, sources claim that the meeting was postponed because Saudi Arabia is in talks with other producers who are not meeting the expected production quota.

Recall that on November 21, Nairametrics reported that Nigeria has failed to significantly increase its oil production level before the November 2023 deadline set by OPEC and risks producing only 1.38 million barrels per day of crude oil in 2024, as set by OPEC in June 2023.

African producers’ context

According to the Nairametrics report cited, African nations might be required to adhere to new crude oil production limits for the upcoming year.

The reason for this potential cut lies in the failure of these African countries to meet their designated production quotas before November 2023. Reports indicate growing tensions within OPEC+ due to disagreements among African members regarding the possibility of reduced oil production quotas.

The Backstory

Back in June 2023, several sub-Saharan African OPEC+ members Nigeria, Angola, Equatorial Guinea, the Republic of Congo, Gabon, Sudan, and South Sudan acknowledged the likelihood of decreased quotas for 2024. However, this reduction would only take effect if they could not demonstrate increased production capacity before November 2023.

Further context on Nigeria

In October 2023, Nigeria’s crude oil production, excluding condensates, reached a peak of 1,350,573 barrels per day. However, throughout the year, production fluctuated between 1 million and 1.34 million barrels per day. These figures fall significantly short of the country’s assigned quota of 1.78 million barrels per day for 2023.

It is evident from this data that Nigeria has failed to make substantial strides in increasing its crude oil production, raising concerns about its ability to meet future quotas set by OPEC+.

This situation highlights the challenges the country faces in boosting its oil production capacity, namely, crude oil theft, which has also affected natural gas output, as confirmed by the Nigeria Liquefied Natural Gas (NLNG) Limited.

What you should know

Reuters reports that Goldman Sachs anticipates that during the upcoming meeting of OPEC+ oil producers, there is a chance of a more significant cut in oil output being considered. The expectation is that Saudi Arabia and Russia might extend their voluntary production cuts until at least the first quarter of 2024.

According to the Reuters report, Goldman Sachs suggests there is a 35% possibility that major OPEC producers could decide to deepen the group’s production cut during the meeting.

The reasoning behind this potential move is to hedge against the risk of Brent prices falling below $80 per barrel, particularly due to anticipated weaker demand in the first quarter of 2024.

This serves as a form of insurance to stabilize prices amid fluctuating market conditions.