The postponement to November 30 of this weekend’s meeting of OPEC and its allies (OPEC+) due to disagreements allegedly among some of its members on setting new reduced production levels highlights the organization’s limits in setting of oil prices.

THE OPEC+ it essentially operates as an international cartel, whose members agree on the level of their production with the aim of setting higher oil prices on the world market. A decrease in supply, given demand, tends to increase oil prices, maximizing the revenue of its countries. Of the 23 OPEC+ countries, 13 are OPEC members, dominated by Saudi Arabia due to the size of their production, and the other 10 are the countries that have been cooperating with them since 2017, among which Russia stands out, also due to the amount of production .

Representatives of OPEC+ countries did not hide last spring, when they decided on an additional production cut of 1.6 million barrels per day, that their goal was to move prices close to $100 per barrel. At this level crude oil prices had moved to average levels in 2022 but this was mainly a result of the impact from the Russian invasion of Ukraine and Western sanctions against Moscow.

OPEC+’s bid to keep prices near $100 a barrel has failed, despite a new voluntary summer production cut of 1 million bpd by Saudi Arabia and a voluntary export cut of 300,000 bpd by Russia . The price of Brent crude, which supplies Europe, fell below $80 a barrel after Israel’s war with Hamas in October led to a fresh surge in prices on fears of an escalation. in the area. But as there were no signs of a wider flare-up in the region that would limit global oil supply, mainly from Iran, prices fell back to near the $80 level.

The artificial supply shortfall of “black gold” caused by OPEC+ this year, reducing supply to levels below global demand, has not had the desired effect for two main reasons. First, the global economy has slowed significantly, with major economies such as Europe’s teetering on the edge of wear and tear, resulting in reduced demand for oil. Second, production and supply from non-cartel countries such as the West is increasing. This is especially true for the US, whose production has risen by 900,000 barrels per day this year as shale technology is harnessed.

With this data, OPEC+ reportedly sought an agreement on new production cuts to support prices, but according to reports there were reactions to the new quotas from African countries – members of OPEC, namely Nigeria and Angola. For this reason, the meeting was postponed to November 30, which, as announced, will take place via teleconference.

It is not known whether these differences will be bridged and what the decision will be next Thursday, but what is becoming clear is that OPEC+ cannot achieve maximalist goals, such as prices at $100 a barrel, at a time when the global economy is wintering. As the analyst noted, any attempt to raise prices will simply lead to even more demand, causing them to fall again