OPEC+ plays host at COP28 on the back of lacklustre supply cuts move

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on Dec 4, 2023
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  • The organisation largely responsible for oil prices, OPEC+, says renewable energy “needs petroleum products”
  • OPEC+ is hosting a pavilion at climate change mega-event Conference of the Parties for the first time ever.
  • This comes on the back of continued falling oil prices, even after OPEC+ announced oil supply cuts.

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The Organisation of the Petroleum Exporting Countries (OPEC+) announced on November 30th that it would “participate” at the COP28, as well as host a pavilion at the conference’s Expo City in Dubai – which is itself a member of OPEC and has been since the 1960s.

The announcement is not without irony, with a cornerstone goal of COP28 reportedly being to work to reduce emissions and global dependency on fossil fuels.

The organisation said in a press release on November 30th that:

The OPEC Pavilion will welcome visitors on a daily basis to present the remarkable efforts undertaken by the Organization and its Member Countries in developing, adopting and promoting various sustainable development and climate change mitigation initiatives and projects, especially with relation to the energy industry”

Voluntary oil supply cuts

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On the same day, OPEC+ members met for a conference, initially planned for 25th and 26th November, and later that day announced voluntary supply cuts to the tune of 2.2 million barrels per day, from January 1st until March 2024.

It said in a press release that the cuts were “aimed at supporting the stability and balance of oil markets.”

See more: oil prices ease as reports of outsized cuts overshadowed by bearish concerns

What are supply cuts?

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Supply cuts to oil production are a premeditated and controlled restriction of a commodity or resource, limiting its flows into one or more markets. These are not to be confused with production cuts, which limit the amount that is produced, as opposed to released for trading.

OPEC+ oil supply cuts are generally instituted to counteract falling demand (and, therefore, price) for oil. As per the laws of supply and demand, more scarcity in a commodity often results in its price being driven up.

A slippery slope for oil prices

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Crude oil prices have eased significantly in recent months. After brent crude oil trading at around $86.80 per barrel in December 2022, spot prices are down significantly as of December 2023, hovering at around $80 to $77.42 in November 2023.

However, after the supply cuts announcement on the 30th, brent crude oil continued on the same trajectory, opening at $83.17 per barrel to close at $81.27.

International criticism for supply cuts

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In the past, OPEC+ supply cuts have been internationally criticised. Most notably, the United States’ White House called them “shortsighted” in a 2022 press statement, saying that any rises in oil prices resulting from supply cuts:

will have the most negative impact on lower and middle-income countries that are already reeling from elevated energy prices.”

Renewables need… fossil fuels?

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Meanwhile, also on November 30th, OPEC+ secretary general Haitham Al Ghais released an article on the upcoming COP28 OPEC pavilion which stated that “all voices need to be at the table for climate negotiations… from across the entire energy system” and that “renewables need petroleum products”.

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