Saudis plan new unilateral output cut: Opec+ delegates

Saudi Arabia is planning to commit to another "voluntary" cut to its crude production, this time a unilateral reduction, according to delegates at today's Opec+ meeting in Vienna.

The size and timing of the new Saudi cut are not clear. 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.

Formal output targets for all 19 Opec+ countries with quotas are expected to remain unchanged at the same level they have been since November last year, although discussions are taking place about whether to rejig baselines from next year. Opec+ ministers are also expected to agree at their meeting today to extend their output co-operation deal for another year until the end of 2024.

The fact that Saudi Arabia deems another reduction necessary highlights the uncertainty around oil demand for the rest of the year. 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.

Beyond this year, the Opec+ group has been discussing whether to recalibrate output baselines in 2024, raising them for those with ample spare capacity but lowering them for those that have been struggling to reach their targets. Baselines are the production level on which Opec+ cuts are calculated under the group's output co-operation deal. These discussions on baselines have delayed both today's meeting of the Opec+ Joint Ministerial Monitoring Committee (JMMC) and the full ministerial meeting.

By Nader Itayim, Bachar Halabi, Aydin Calik and James Keates