The Organization of the Petroleum Exporting Countries and its allies, known collectively as OPEC+, reached a significant agreement on Sunday to extend their existing crude oil output cuts into 2025, in addition to prolonging other supply limitations over various periods.
Opec+ members have agreed to extend deep cuts in oil production to the end of 2025
Opec+ members are currently producing almost 6mn b/d less than their combined capacity, representing about 6% of global supply
On Friday, benchmark Brent crude traded at $80 a barrel, down from… pic.twitter.com/ZA7ksTeel5
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Under the newly agreed terms, OPEC+ will maintain a production limit of 39.725 million barrels per day in the next year. This figure includes the standard production quotas for each member country and accounts for Angola’s departure from the group earlier in January. Additionally, the UAE is set to increase its oil output by 300,000 barrels per day, a change that will gradually take effect from January 2025 through the end of September of that year.
In a notable development, a subset of OPEC+, led by major oil producers Saudi Arabia and Russia, decided to extend nearly 1.7 million barrels per day of voluntary cuts that were initially set to conclude at the end of this year. These cuts will now continue throughout 2025. Moreover, another round of voluntary reductions totaling 2.2 million barrels per day, previously scheduled to end after the second quarter of this year, will now be extended until the end of the third quarter. The alliance plans to incrementally restore the reduced quantities on a monthly basis until September 2025.
OPEC EXTENDS CRUDE PRODUCTION CUTS
“OPEC+, on Sunday agreed to extend their official crude output cuts into 2025.
The coalition will produce a combined 39.725 million barrels per day next year, according to a table published by the OPEC Secretariat”
Per CNBC pic.twitter.com/jZVXdZerZ2
— Standard and Rich Podcast (@standardandrich) June 2, 2024
The discussions regarding these decisions were part of broader meetings held in Riyadh, involving ministers from countries participating in the voluntary cuts. Saudi Energy Minister Abdulaziz bin Salman emphasized during a press briefing that the meeting was intended to ensure clear communication and mutual understanding among members, not due to any internal discord.
The focus of OPEC+ is increasingly shifting towards balancing supply and demand, especially with the onset of the summer driving season and the conclusion of refinery maintenance in China, the world’s largest crude importer. However, projections about future demand vary widely. OPEC’s latest report anticipates a demand increase of 2.25 million barrels per day for the current year, whereas a more conservative estimate from the International Energy Agency suggests a rise of just 1.06 million barrels per day.
OPEC EXTENDS CRUDE PRODUCTION CUTS
“OPEC+, on Sunday agreed to extend their official crude output cuts into 2025.
The coalition will produce a combined 39.725 million barrels per day next year, according to a table published by the OPEC Secretariat”
Per CNBC pic.twitter.com/jZVXdZerZ2
— Standard and Rich Podcast (@standardandrich) June 2, 2024
Minister Abdulaziz commented on these diverging forecasts, noting that while OPEC’s outlook might be more optimistic, there are also more pessimistic views being expressed by others. He expressed a cautious approach to the potential tightening of the market, stating, “I will believe it when I see it.”
OPEC+ is scheduled to reconvene on December 1 to further assess and adjust their policy measures in response to ongoing market conditions.
Major points
- OPEC+ agreed to extend their official crude output cuts into 2025, maintaining a production limit of 39.725 million barrels per day.
- The agreement includes an increase of 300,000 barrels per day in UAE’s output starting January 2025.
- A subset of OPEC+, including Saudi Arabia and Russia, will continue nearly 1.7 million barrels per day of voluntary cuts through 2025.
- Additional voluntary output reductions of 2.2 million barrels per day have been extended until the end of the third quarter of this year, with plans to gradually restore them by September 2025.
- The group’s next meeting is scheduled for December 1 to further discuss policy steps amid varying forecasts for global oil demand.
Susan Guglielmo – Reprinted with permission of Whatfinger News
