OPEC and its allies began two days of meetings on Saturday that may culminate in further production cuts of as much as 1 million barrels per day, OPEC+ sources told Reuters, as the group faces flagging oil prices and a looming supply glut.

OPEC+, which groups the Organization of the Petroleum Exporting Countries and allies led by Russia, pumps around 40% of the world’s crude, meaning its policy decisions can have a major impact on oil prices.

Three OPEC+ sources told Reuters on Friday that cuts were being discussed among options for Sunday’s session. Two other sources said additional cuts were unlikely.

OPEC held a separate brief meeting on Saturday but ministers made no comment on possible policy decisions afterwards.

The three sources said cuts could amount to 1 million bpd on top of existing cuts of 2 million bpd and voluntary cuts of 1.6 million bpd, announced in a surprise move in April and which took effect in May.

If approved, this would take the total volume of reductions to 4.66 million bpd, or around 4.5% of global demand.

“This number is premature, we didn’t go into these things (yet),” Iraq’s oil minister Hayan Abdel-Ghani said prior to the meetings, when asked about a possible cut of 1 million bpd.

Typically production cuts take effect the month after they are agreed, but ministers could also agree to a later implementation. They could also decide to hold output steady.

Western nations have accused OPEC of manipulating oil prices and undermining the global economy through high energy costs. The West has also accused OPEC of siding too much with Russia despite Western sanctions over Moscow’s invasion of Ukraine.

In response, OPEC insiders and watchers have said the West’s money-printing over the last decade has driven inflation and forced oil-producing nations to act to maintain the value of their main export.

Asian countries such as China and India have bought the lion’s share of Russian oil exports and refused to join Western sanctions on Russia.

BASELINE TALKS

OPEC+ ministers will start gathering from 10 a.m (0800 GMT) on Sunday in Vienna, three hours earlier than originally planned, and have a full meeting from 11 a.m. onwards.

Two OPEC sources said the ministers could also discuss new production baselines from which each member performs cuts.

Such talks have previously turned contentious.

West African countries such as Nigeria or Angola have long been unable to produce in line with their targets but have opposed lower baselines because new targets could force them to perform real cuts.

By contrast, the UAE has insisted on getting higher baselines in line with its growing production capacity but that would mean its share in the overall cuts would decrease.

“We look forward to a resolution that will ensure sustainability of balance of supply and demand,” UAE’s Energy Minister Suhail Al Mazroui said ahead of meetings.

Ministers spoke to reporters in their hotels in Vienna. OPEC has denied media access to its headquarters to reporters from Reuters and other news media.

The surprise output announcement in April helped to drive oil prices about $9 per barrel higher to above $87, but they swiftly retreated, under pressure from concerns about global economic growth and demand. On Friday, international benchmark Brent settled at $76. [O/R]

Last week, Saudi Arabia’s Energy Minister Prince Abdulaziz said investors who were shorting the oil price, or betting on a price fall, should “watch out”, which many market watchers interpreted as a warning of additional supply cuts.

The International Energy Agency expects global oil demand to rise further in the second half of 2023, potentially boosting oil prices. [IEA/M]

Analysts at JPMorgan (NYSE:JPM), however, said OPEC had not acted quickly enough to adjust supply to record high levels of U.S. output and higher than expected Russian exports.

“There is simply too much supply,” the JPMorgan analysts said in a note, adding that extra cuts could amount to around 1 million bpd.