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OPEC+ Agrees to Extend Output Cuts Until Mid-Year

Anonymous sources within OPEC revealed on Sunday that certain OPEC members and allies, spearheaded by Russia, have reached an agreement to prolong voluntary oil output reductions from the first quarter into the second quarter of 2024.

These cuts, initially totaling approximately 2.2 million barrels per day (bpd), were endorsed by OPEC+ in November, with Saudi Arabia leading by example by extending its own voluntary reduction. OPEC+ has been implementing successive output reductions since late 2022 to stabilize the market amidst heightened production from non-member producers like the United States, coupled with concerns regarding demand due to elevated interest rates in major economies. OPEC watcher Amena Bakr confirmed the news on Sunday in a short tweet: 

Oil analysts, for the most part, had expected the extension. While some pundits argued that some OPEC+ members would seek to increase supply with Brent prices above $80, it appears that OPEC+ remains cautious about bringing back additional supply amid ongoing uncertainty surrounding demand in China. Looking ahead, the next OPEC meeting in June will provide insight into how OPEC perceives demand growth in Asia developing in late 2024 and 2025. Thus far, the group of producers has managed to align its interests, but maintaining this unity may become more challenging if the anticipated surge in demand materializes later this year.

By Tom Kool for Oilprice.com

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Tom Kool

Tom majored in International Business at Amsterdam’s Higher School of Economics, he is Oilprice.com's Head of Operations More

Comments

  • Mamdouh Salameh - 3rd Mar 2024 at 2:10pm:
    There is no justification for OPEC+ to change its production policies whether by making additional cuts or lifting production. Therefore, it has no alternative but to extend them.

    However, some of the so-called voluntary cuts totalling 2.2 million barrels a day (mbd) are virtually no cuts at all since the Saudi cut of 1.0 mbd since June 2021is a cut that never was since Saudi Arabia couldn't produce it anyway because of production difficulties whilst an estimated half of the remaining cuts (600,000 barrels a day) by other OPEC+ members were never implemented.

    Therefore, discounting the Saudi cut and the unimplemented ones will reduce the actual cuts to 600,000 b/d.

    The majority of OPEC members need a Brent crude oil price ranging from $90-$100 a barrel to be balance their budgets.

    Dr Mamdouh G Salameh
    International Oil Economist
    Global Energy Expert
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