OPEC Secretary General Haitham Al Ghais announced ongoing discussions with Mexico, Azerbaijan, Malaysia and Brunei regarding their potential membership in the organization. These dialogues signify a strategic endeavor to fortify OPEC's position and enhance price stabilization in the aftermath of the prolonged volatility witnessed in the wake of the COVID-19 pandemic.
"The consultations with new countries outside the organization contribute to strengthening the cohesion of OPEC," said Al Ghais, signaling a more proactive approach aimed at bolstering its collective strength and fostering a more resilient global oil market.
OPEC ministers met on the sidelines of a seminar in Vienna to assess market conditions and agreed to continue consultations with their OPEC+ Extended Group counterparts. The objective of these consultations, according to a statement issued on Wednesday, is to support stable and balanced oil prices.
The extended group includes 10 countries outside of OPEC and aims at facilitating consultations concerning oil market decisions without necessarily obligating them to comply. Beyond the four countries currently in discussions with OPEC, the extended group also includes Russia, Kazakhstan, Bahrain, Oman, Sudan and South Sudan.
Recently, OPEC reached an agreement to extend production cuts until 2024, signaling a united front among member nations to stabilize oil prices in the face of economic uncertainty. The decision came after intensive negotiations with African countries on the measurement and implementation of these cuts. The extension cuts reflects OPEC's determination to address the challenges posed by the volatile oil market.
Starting May 2023, OPEC agreed to cut oil production by 500Mb/d for the remainder of the year. However, despite the production cuts, China's economic activity had a notable impact on oil futures, affecting oil prices throughout May. The interconnectedness of the global economy continues to exert influence on oil markets, presenting challenges to OPEC's efforts to stabilize prices.
The decision ultimately led to a rise in oil prices. The West Texas Intermediate (WTI) crude oil surged by 4.6%, reaching US$75.06/b on June 5. Alternatively, Brent crude oil witnessed a 2.4% increase, settling at about US$77/b.
Saudi Arabia has effectively demonstrated its commitment to reducing oil production. However, apprehensions persist regarding Russia's compliance with the agreement. Despite Moscow’s announcement to extend its voluntary cut of 500Mb/d until the end of 2024, industry experts remain skeptical about Russia’s commitment to uphold its promise due to ongoing oil exports in defiance of Western sanctions. Moreover, the number of idle oil wells raises questions about its long-term production stability.