OPEC+ Extends Deep Oil Production Cuts into 2025

EghtesadOnline: Brent crude oil prices have been trading near $80 per barrel in recent days, below what many OPEC+ members need to balance their budgets. Worries over slow demand growth in top oil importer China have weighed on prices alongside rising oil stocks in developed economies.

The Organization of the Petroleum Exporting Countries and allies led by Russia, together known as OPEC+, have made a series of deep output cuts since late 2022.

OPEC+ members are currently cutting output by a total of 5.86 million barrels per day (bpd), or about 5.7% of global demand, Reuters reported.

Those include 3.66 million bpd of cuts, which were due to expire at the end of 2024, and voluntary cuts by eight members of 2.2 million bpd, expiring at the end of June 2024.

On Sunday, OPEC+ agreed to extend the cuts of 3.66 million bpd by a year until the end of 2025 and prolong the cuts of 2.2 million bpd by three months until the end of September 2024.

OPEC+ will gradually phase out the cuts of 2.2 million bpd over the course of a year from October 2024 to September 2025.

OPEC expects demand for OPEC+ crude to average 43.65 million bpd in the second half of 2024, implying a stocks drawdown of 2.63 million bpd if the group maintains output at April's rate of 41.02 million bpd.

The drawdown will be less when OPEC+ starts phasing out the 2.2 million bpd voluntary cuts in October.

The International Energy Agency, which represents top global consumers, estimates that demand for OPEC+ oil plus stocks will average much lower levels of 41.9 million bpd in 2024.

Analysts had expected OPEC+ to prolong voluntary cuts by a few months due to falling oil prices and sluggish demand.

But many analysts had also predicted the group would struggle to set targets for 2025 as it had yet to agree individual capacity targets for each member, an issue that had previously created tensions.

OPEC+ will hold its next meeting on December 1, 2024. / Tasnim