Brazil joins OPEC+, but summit fails over cuts and quotas

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Brazil’s entry into OPEC+ is a real surprise to emerge from the oil producers’ summit, which will expand participation to 24 countries from January. As for the cuts, the market was disappointed: there were rumors throughout the day of a “tentative” deal for a big squeeze, one million barrels a day or even two, but no mention of that in the statement released at the end of the meeting. So prices reversed and Brent, which had exceeded $84 a barrel, fell back below $83.

An additional reduction in production will eventually occur. However, it was announced in no particular order by only some countries and only for the first quarter of 2024. It took a second statement (from the OPEC Secretariat and not OPEC+) to summarize them, stating that they reach «2.2 million barrels per day». eight countries. But in reality it barely reaches 700 thousand. A somewhat theoretical figure combines a bit of everything.

Extraordinary voluntary contributions were promised by Iraq (-223 thousand bd), the United Arab Emirates (-163 thousand), Kuwait (-135 thousand), Kazakhstan (-82 thousand), Algeria (-51 thousand) and Oman (-42 thousand). There is Russia, which promises to increase its “voluntary” reduction from 300 to 500 thousand bg, but counts both oil and refined products. And there is yet another extension by Saudi Arabia, until March, of an additional 1 mbd cut that Riyadh offered at a summit last June, calling it a “lollipop.” The hope then was to appease the coalition allies. But they still seem reluctant to cooperate.

The summit on Thursday the 30th was postponed for four days to allow time for negotiations. And instead of taking place in Vienna, it migrated to the web to facilitate confidentiality and perhaps better hide discontent. But Riyadh has failed to win unanimous OPEC+ approval for cuts it would like to see not only more drastic but also more fairly redistributed.

The summit was also a failure in terms of the dispute with African countries: Angola will “produce more than the quota set by OPEC”, Governor Estevao Pedro said just hours after the group’s statement, which listed quotas of 1.11 mbd for Luanda. , 1.5 mbd for Nigeria and 0.277 mbd for Congo, indicating that the problem has been resolved. “This is not a question of disobeying OPEC – Pedro insisted – we presented our position and OPEC should take it into account”.

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