OPEC+ extends crude output agreement until 2025, supporting oil prices amid global demand concerns and rising U.S. output.
The OPEC+ alliance, featuring major oil-producing countries such as Saudi Arabia and Russia, has decided to extend its crude output cuts into 2025, in a move aimed at supporting oil prices amid concerns over global demand and an increase in U.S. production. This significant decision was made at the 37th OPEC and non-OPEC Ministerial Meeting held in Riyadh, Saudi Arabia, where the group reaffirmed their commitment to the Declaration of Cooperation (DoC) and agreed to maintain the oil production levels they set until the end of 2025. They also plan to continue employing independent sources to guide production levels for 2026.
The extended production cut agreement includes a gradual easing of some reductions starting in October 2024. This step reflects Saudi Arabia's efforts to balance the market and accommodate the diverse interests within OPEC+. Notably, the United Arab Emirates (UAE) negotiated to see a ~10% boost in its production target for the next year, evidencing the delicate negotiations that underpin these agreements. The Joint Ministerial Monitoring Committee (JMMC) will oversee compliance and market conditions, with the authority to call additional meetings as needed.
Despite these efforts and amidst Middle Eastern tensions that saw a nearly 6% reduction in the global crude supply, oil prices have experienced a downturn. Brent crude has seen a significant decrease from $91 in April to $82 per barrel, and West Texas Intermediate (WTI) dropped from nearly $87 to $78. This decline is attributed to the expansion of U.S. crude production, leading to increased supply, and weak demand from China and other significant economies.
In a broader look at production specifics, OPEC+ has set a combined production target of 39.725 million barrels per day for the next year, factoring in Angola's departure from the organization and a gradual increase in the UAE's output by 300,000 barrels per day starting January 2025. Additionally, a subset of OPEC+ members, including Saudi Arabia and Russia, have agreed to extend nearly 1.7 million barrels per day of voluntary cuts throughout 2025, alongside another set of voluntary output reductions totaling 2.2 million barrels per day until the end of the third quarter of the same year.
These decisions come at a time when forecasts on supply-demand balances vary significantly. While OPEC's latest reports predict a substantial increase in demand, other analyses, such as the International Energy Agency's report, forecast a more modest uptick. Saudi Energy Minister Abdulaziz bin Salman highlighted the diverse outlooks on demand but stressed the coalition's cautious approach to managing supply in anticipation of possible market tightness.
The next OPEC+ ministerial meeting is scheduled for December 1, 2024, where the alliance will further assess market conditions and adjust their strategies accordingly. This meeting is crucial for ensuring that the messaging and strategic decisions are collectively understood and agreed upon among member countries, aiming to secure stability in the global oil market.
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