OPEC+ is expected to agree on extending its deep oil output cuts on Sunday, possibly into 2024 and 2025, according to two sources within the organization. This decision comes as the group aims to stabilize the market due to weak global demand growth, high interest rates, and increased US production. Oil prices hover around $80 per barrel, which is lower than what many OPEC+ members require to balance their budgets. Concerns about slow demand growth in China, a major oil importer, have contributed to these price pressures, leading analysts to predict an extension of cuts to align with supply.
Since late 2022, the OPEC and allies have been implementing significant output reductions. Currently, OPEC+ members are cutting production by 5.86 million barrels per day (bpd), representing about 5.7% of global demand. This includes 3.66 million bpd by OPEC+ members until the end of 2024 alongside 2.2 million bpd in voluntary cuts by certain members expiring in June.
The upcoming agreement may involve extending some or all of the 3.66 million bpd cuts into 2025 and retaining some or all of the 2.2 million bpd voluntary cuts until the third or fourth quarter of 2024. Countries like Algeria, Iraq, Kazakhstan, Kuwait, Oman, Russia, Saudi Arabia, and the United Arab Emirates have implemented deeper voluntary cuts compared to the group agreement.
OPEC ministers will gather for meetings starting on Sunday in Riyadh before moving online for further discussions throughout the day. Several ministers from countries with significant voluntary cuts will attend in person while others will participate remotely.
The decision on output cuts will have significant implications for the global oil market and participating OPEC+ members.
In conclusion,
OPEC+ is set to extend its deep oil output cuts until at least early next year as it aims to stabilize oil prices amidst weak demand growth and other market factors that have put downward pressure on prices.
The organization has been implementing significant output reductions since late last year when it agreed to cut production by a record-breaking amount of over one million barrels per day (mbd) after being hit hard by low demand due to COVID-19 lockdowns worldwide.
This extension of cuts could see countries such as Algeria and Saudi Arabia continue with their current levels of reduction beyond December this year while others like Russia may choose not participate entirely.
With this move likely having far-reaching consequences for both producers and consumers alike it remains to be seen how long these measures will continue before they are scaled back or removed altogether as markets start recovering from pandemic-induced disruptions.
