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Oil Industry Thinks OPEC+ Will Extend Production Cuts Into Q2

Oil industry watchers and analysts are betting on OPEC+ extending its oil production cuts beyond the first quarter of 2024 into the next quarter, a new Bloomberg survey revealed on Friday.

The anonymous survey has overwhelmingly predicted that OPEC+ will be forced to extend the cuts into Q2 2024, with 14 of the 17 traders and analysts surveyed betting that OPEC+ will not make any changes to its production plans next quarter.

"Supply is exceeding demand, and to keep prices stable, OPEC+ has to keep that oil off the market," Bob McNally, president of consultants Rapidan Energy Group, said.

"OPEC+ have no choice but to extend the current cuts in order to avoid a meltdown," Tamas Varga, PVM Oil Associates Ltd analyst, said.

The OPEC+ group has not announced its official Q2 plans, and they haven't set a date yet to discuss Q2 plans either.

While most of those surveyed feel that OPEC+ is likely to extend their cuts into the next quarter, others feel that OPEC+ may increase their production cuts, after some of its members-including Iraq and Kazakhstan-continued to overproduce in January.

Apart from the survey, the IEA has estimated that while global oil demand growth is losing momentum, the global oil markets are indeed tightening after observing that oil stocks fell by about 60 million barrels in January. If markets are to continue to tighten, one thing must be true, if IEA estimates prove accurate: OPEC+ must maintain its current discipline and unwind its production cuts gradually-not all at once at the end of the first quarter.

How slow the cuts would have to be unraveled to not send oil prices spiraling downward varies from analyst to analyst.

"The physical markets are telling us that actually markets have tightened," director of research at Energy Aspects Ltd, Amrita Sen told Bloomberg. "We do believe that OPEC+ will extend its cuts in some form." Then, according to Sen, the surplus will disappear.

By Julianne Geiger for Oilprice.com

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Julianne Geiger

Julianne Geiger is a veteran editor, writer and researcher for Oilprice.com, and a member of the Creative Professionals Networking Group. More