The date matters, so it goes first: November 30, 2023, a Thursday, an online meeting of oil ministers. OPEC+, the producer group that pumps more than 40% of the world’s oil, agreed to voluntary curbs worth roughly 2.2 million barrels per day for the first quarter of 2024, led by Saudi Arabia rolling over its one-million-barrel voluntary reduction. The market’s verdict arrived the same day: benchmark prices settled down around 2%, partly because the cuts were voluntary and partly because traders had expected deeper ones. “The market reaction implies disbelief in the full efficacy of the cuts,” JP Morgan analyst Christyan Malek said at the time. Notably, a cartel announcing two million barrels of restraint and being paid for it with a price fall is as clean a signal as oil markets give.
The arithmetic of the 2.2 million, as the group’s statement and the country announcements broke it down: the carry-over of Saudi and Russian voluntary reductions already standing at 1.3 million barrels per day, plus 900,000 barrels of fresh reductions from eight producers. Russia pledged an additional 500,000, up from its former 300,000, including 200,000 barrels of fuel export reductions, with crude and products both counted, on Deputy Prime Minister Alexander Novak’s word. Iraq announced 223,000 by its own tally, or 220,000 for the quarter by Reuters’ accounting; the UAE 163,000, Kuwait 135,000, Kazakhstan 82,000, Algeria 51,000 and Oman 42,000. Once the quarter ended, the reductions were to be unwound step by step if conditions allowed, and the group used the same meeting to invite Brazil, a top-10 producer whose energy minister hoped to join in January, all of it coinciding with the opening of the COP28 climate summit in the United Arab Emirates.
The skepticism came from every desk. “(It) seems traders either aren’t buying that members will be compliant or don’t view it as being sufficient,” OANDA’s Craig Erlam said, adding that the lack of formal commitment “hints at fractures within the alliance”. UBS’s Giovanni Staunovo made the sharper structural point: because the cuts were voluntary rather than part of a binding OPEC+ agreement, a large fraction could be a pledge on paper with fewer barrels actually leaving the market. Goldman Sachs called the reductions “a temporary response to inventory builds and production growth (elsewhere).” and PVM’s John Evans warned the deal “will not stop a billowing cloud of confusion that is going to take the oil market weeks and months to figure out, and only if the self-reporting data is indeed reliable,” The demand side was no help: prices had slid from near $98 in late September, American manufacturing was subdued, China struggled, and the International Energy Agency had forecast a 2024 slowdown as “the last phase of the pandemic economic rebound dissipates and as advancing energy efficiency gains, expanding electric vehicle fleets and structural factors reassert themselves.”
For all the noise, the salient point was across the Atlantic. United States crude production had just set a monthly record of 13.24 million barrels per day in September, Energy Information Administration data showed, and American inventories stood at 440 million barrels, 20 million higher than a month earlier by Rystad Energy’s count. Every barrel OPEC+ held back to defend a price was a barrel of market share ceded to rivals pumping at record rates, which is the arithmetic that turned the sustainability of the policy into every desk’s open question. Saxo Bank’s Ole Hansen gave the ceiling as he saw it: “Once the dust settles, these initiatives may be enough to sustain the price of Brent in the $80s, but with the U.S. economy heading for a semi-hard soft landing and China still struggling, the focus on weakening demand will be stronger than on this attempt by OPEC+,”
The house itself was not fully in order. Angola, one of the dissenters inside the group, not only declined to offer an additional cut but publicly rejected its assigned quota, restating a proposal for a 1.18 million barrel per day quota from January and saying it would not stick to the new allotment; no sub-Saharan African member volunteered anything. Against that, Malek argued the framework itself showed trust, with Brazil’s invitation “testament to the strength in numbers for OPEC+.” It would seem the December 2023 ledger closed on two facts in tension: a group still able to summon two million barrels of promised restraint, and a market, a rival producer and several of its own members pricing in the possibility that the promise was the easy part.
