What happened in Vienna? The meeting of the OPEC+ group is behind us

It was not an easy meeting members of the OPEC+ cartel. The group failed to agree on deeper cuts, but set production targets for 2024 and extended voluntary cuts. The Saudis also decided to make further voluntary cuts.

What has been agreed?

The OPEC+ meeting was eventful. Prior to the meeting, the cartel was expected to announce further supply cuts - which is easier said than done. As Saudi Arabia struggled to persuade other members to cut deeper, the group instead agreed to introduce a production target of 40,46 million barrels per day for 2024. This is less than the production target of 41,86 million barrels per day set last October, which runs from November 2022 to December 2023.

In addition to setting production targets for next year, members who announced voluntary cuts in supplies of 1,66 million barrels per day in April have decided to extend them until the end of 2024.

Actions taken by OPEC+ do little to address the immediate demand issues. As a result, Saudi Arabia announced that it would make further voluntary cuts in supplies by 1 million barrels a day in July, leaving Saudi Arabia's production at around 9 million barrels a day. There is also the option to extend this additional voluntary cut if needed.

What does this mean for the market?

In the run-up to the meeting, Saudi Arabia's energy minister, Prince Abdulaziz bin Salman, built expectations for further cuts in supplies - so it was important for the group to leave the meeting with some cut. The extension of voluntary cuts in deliveries until the end of 2024 should not radically change the outlook. However, further voluntary cuts by Saudi Arabia are a supporting factor in the near term. This should provide some limited immediate gains for the market and should also reinforce Saudi Arabia's commitment to trying to push the bottom of the market.

Why are we seeing cutbacks now?

From a fundamental point of view, the Saudis do not need to further reduce supplies. But it is clear that they are trying to push prices above $80 a barrel.

Given the increased spending by the Saudi government looking to diversify its economy, crude oil prices on the verge of fiscal profitability, which has increased in recent years. Saudi Arabia needs just over $80 a barrel to balance its budget.