<article><p class="lead">Saudi Arabia has pledged another "voluntary" cut to its crude production, this time a unilateral 1mn b/d reduction for July, with the option to extend. </p><p>The other headlines from Sunday's Opec+ ministerial meeting in Vienna include a rollover of formal output quotas for this year but also a reduction of 1.4mn b/d in the group's overall target next year, driven by a recalibration of production baselines for some members. Ministers agreed today to extend the co-operation deal between Opec and its non-Opec partners until the end of 2024.</p><p>A rollover of output targets for the time being had been viewed by delegates as the most likely outcome ahead of the meeting. Another voluntary cut from Saudi Arabia was not widely predicted. Riyadh is already producing below its formal quota, after joining seven other Opec+ countries in April in announcing a combined voluntary cut of 1.16mn b/d from May to the end of the year. Saudi Arabia's share of that cut is 500,000 b/d, matching an earlier commitment by Russia to lower its production by 500,000 b/d from March.</p><p>The new cut means Saudi Arabia will aim to produce 9mn b/d next month, which is 1.5mn b/d below its official quota. The fact Riyadh deems another reduction necessary highlights the uncertainty around the outlook for oil demand at the moment. There is a wide variation in predictions of demand growth from prominent forecasters. Most agree that the lion's share of this year's demand increase will take place in the second half of the year, although much rests on the scale of China's post-Covid rebound.</p><h2>Lower the base</h2><p>Formal output targets for all 19 Opec+ countries with quotas are to remain unchanged for the rest of 2023, at the same level they have been since November last year. But there will be changes in 2024 after ministers agreed to rejig baselines for some members, lowering them for several countries that are struggling to meet their current quotas while raising the UAE's to take into account its growing capacity. </p><p>Baselines are the production level on which Opec+ cuts are calculated under the group's output co-operation deal. The net effect of these baseline revisions is a reduction of around 1.4mn b/d in the group's overall production target from January 2024, with Russia and Angola seeing the biggest declines, partially offset by a 200,000 b/d rise in the UAE's quota. Next year's quota adjustment should be viewed in the context of several members falling way short of current targets. <i>Argus</i> estimates that the group as a whole was 2.4mn b/d under target in April.</p><p>The discussions on baselines delayed today's Opec+ meeting by several hours. The next ministerial gathering has been scheduled for 26 November.</p><p class="bylines">By Nader Itayim, Bachar Halabi, Aydin Calik and James Keates</p></article>
