Brazil’s OPEC+ Entry: Analysing the Impact on Global Oil Prices and Market Dynamics

Analyzing Brazil's Position and Market Response to Production Quotas.

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Joseph P Chacko
Joseph P Chacko
Joseph P. Chacko is the publisher of Frontier India. He holds an M.B.A in International Business. Books: Author: Foxtrot to Arihant: The Story of Indian Navy's Submarine Arm; Co Author : Warring Navies - India and Pakistan. *views are Personal

Brazil has decided to join the OPEC+ Charter of Cooperation of oil-producing nations in January 2024, as stated on the OPEC website. Minister of Mines and Energy of the Federative Republic of Brazil, Alexandre Silveira de Oliveira, was greeted by attendees during the 36th ministerial meeting of OPEC and non-OPEC countries, which was conducted via video conference.

Based on data from Brazil’s National Agency of Petroleum, Natural Gas, and Biofuels (ANP), the country’s average daily oil production increased by 4% to 3 million barrels in the previous year. Brazilian oil and gas conglomerate Petrobras plans to increase Brazil’s output by an additional 4–5% in 2023–2024.

Rodolfo Saboia, the chief executive officer of ANP, stated in October that the nation’s daily oil production will surpass 4 million barrels by 2025. At present, Brazil’s daily average production exceeds 3.5 million barrels.

Based on data provided by OPEC, Brazil occupied the seventh position globally in 2022 with a daily oil output of 3.022 million barrels. Brazil’s global market share is between 3.5% and 4%. Brazil is producing approximately 3.2 million barrels of oil per day, as stated in the World Oil Outlook 2023, which OPEC published in October.

Due to its non-membership in OPEC+, Brazil was considered a free rider. It benefited from the reduction in oil production by OPEC+ members, resulting in an increase in oil prices on international markets or halted its decline.

OPEC+ members have acted contrary to the US and Western expectations since 2021. The OPEC+ decision elicited discontent among the Western Nations. The United States opposed OPEC+ because it felt it was politically improper and beneficial for Russia when non-Western oil producers assisted Russia in coping with Western economic pressure. In response to its assistance to Russia, Brazil remained unaffected by American pressure and refrained from reducing its oil output in anticipation of others doing so; consequently, the oil price either remained stable or increased. Having rectified this position, Brazil will now be admitted as a member of OPEC+.

OPEC+ nations reached an agreement on November 30 to reduce oil production. Early in 2024, Saudi Arabia will specifically maintain a reduced supply of one million barrels per day. Voluntary additional export limits by Russia will be increased by 200,000 barrels daily, for a total of 500,000 barrels daily.

It is unlikely that Brazil will be willing to support all of the alliance’s initiatives immediately and reduce its oil production. Brazil is unlikely to quickly back OPEC+ efforts.

This month, Reuters reported that Alexandre Silveira, the Minister of Mines and Energy for Brazil, stated that Brazil would continue to refrain from participating in the activities taken by the organisation to restrict oil production. Additionally, Reuters has no specific information regarding whether Brazil will engage in OPEC+ as an observer or a full member after participating in the organisation.

Hence, it is doubtful that the country will swiftly implement the production quota system in 2024, nor will it start sharply cutting or strictly restricting production limitations. At least temporarily, Brazil may assume the role of an observer in OPEC+. OPEC+ and Brazil may both be interested in establishing a closer partnership in the future.

Including additional participants will augment the market share of OPEC+ and bolster the sway of agreement participants over the market landscape, enabling them to address prevailing challenges more efficiently. The decisions made by OPEC+ are more significant because more nations are operating under a single oil production programme. When substantial market disruptions occur, Brazil is more likely to adopt the strategies implemented by other OPEC+ members.

As OPEC+’s market share increases, the alliance’s influence will intensify. Brazil requires the proper equipment to minimise hazards and maximise the impact of oil exports. By uniting nations with comparable interests, OPEC+ can assist in this regard.

Once more, Brazil’s membership in OPEC+ further emphasises that this is an alliance of non-Western oil exporters. There will be greater chances for international negotiations for the BRICS. It will bring a certain amount of weight to the negotiating table if the group includes oil-producing nations, as the BRICS do.

Since 1960, OPEC (Organisation of Petroleum Exporting Countries) has been in existence. Saudi Arabia, Iraq, Iran, Kuwait, the United Arab Emirates, Libya, Algeria, Nigeria, Angola, Gabon, Equatorial Guinea, Venezuela and Congo are its current members. On numerous occasions, the oil cartel’s composition has shifted. As an illustration, Qatar withdrew from OPEC in December 2018 to concentrate on gas production.

In reaction to the drop in oil prices in the middle of the 2010s, countries that were not initially members created a bigger alliance with OPEC known as OPEC+. OPEC+ comprises ten nations: Russia, Azerbaijan, Kazakhstan, Bahrain, Oman, Brunei, Malaysia, Mexico, Sudan, and South Sudan. Venezuela, Libya, and Iran have all withdrawn from the ongoing OPEC+ oil production limit agreements.


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