Oil slumps 5% as Opec+ postpones meeting

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Oil prices slumped almost 5 per cent on Wednesday after the Opec+ oil cartel announced it would postpone its planned meeting to next week, which traders took as a sign the group is struggling to agree on further supply cuts.

Opec+ said the production meeting, originally scheduled for this Sunday, would be moved to Thursday next week, without giving a reason for the change. The move is unusual as it will coincide with the start of the UN COP climate talks, which the UAE, an Opec member, is hosting.

The sudden change of schedule comes at a challenging time for the group, as oil prices were already well down on their highs for the year, despite a series of production cuts led by Saudi Arabia over the past 12 months.

Prices were already slipping ahead of the announcement but the sell-off accelerated following Opec’s statement.

Brent, the international crude oil benchmark, fell as much as 4.6 per cent to $78.62 a barrel, while West Texas Intermediate, the US benchmark, fell 4.4 per cent to $74.38 a barrel.

“This postponement indicates difficulties within the Opec+ group to reach an agreement to cut production,” said Jorge León at Rystad. “Every member country acknowledges the need to reduce output to support prices into 2024. The question is how to share the burden of this.”

The Financial Times reported on Friday that the group was considering a further production cut of up to 1mn barrels a day to help steady the market, in addition to Saudi Arabia extending its existing voluntary cuts until at least the end of the first quarter.

The cut under discussion, while primarily motivated by falling prices, was also designed as a show of influence from the group at a time when many of its Middle Eastern members are angry over the Israel-Gaza war.

Two analysts noted that delaying the meeting until Thursday meant a four-day ceasefire agreed between Israel and militant group Hamas on Wednesday will have expired by the time of the meeting.

Announcing production cuts when hostilities resume would potentially have more impact, if designed to at least partially send a message of Arab unity and a rebuke to the White House, which has firmly backed Israel.

People close to Opec+ also suggested that there are tensions in the group over members exceeding production targets, despite agreeing to tighter curbs in June.

African members Angola and Nigeria have been hesitant to cut production, while Saudi Arabia has a history of threatening to raise output to try to enforce compliance among members.

“Saudi, with a little help from Russia, has been carrying the whole market,” said Bjarne Schieldrop, chief commodities analyst at SEB. “Saudi Arabia has to make sure that all members are painfully aware of this possibility [of Saudi Arabia raising production] before the meeting, so I think this is what is now happening with the delay.”