OPEC+ has reached an agreement to prolong most of its significant oil production cuts until the end of 2024, with plans to gradually phase them out in 2025 to stabilize the market amidst sluggish global demand growth, elevated interest rates, and increasing competition from U.S. oil production.
Current oil prices hover around $80 per barrel, falling below the thresholds needed by many OPEC+ members to maintain balanced budgets. Concerns regarding sluggish demand growth in leading oil importer China, alongside surging oil inventories in developed nations, have contributed to the pressure on oil prices.
The collaboration between the Organization of the Petroleum Exporting Countries and its allies, notably Russia, known as OPEC+, has implemented substantial output cuts since late 2022. Presently, OPEC+ members are collectively reducing output by 5.86 million barrels per day (bpd), equivalent to about 5.7% of the global demand.
These measures involve a 2 million bpd cut by all OPEC+ members, followed by the initial voluntary cut from nine members amounting to 1.66 million bpd, and a subsequent voluntary cut from eight members totaling 2.2 million bpd.
The extension of the first round of cuts is now set until the conclusion of 2025 from the previously slated end of 2024, as confirmed by the group. Additionally, OPEC+ has decided to prolong the third round of voluntary cuts until the third quarter of 2024, with further details to be disclosed.
Noteworthy countries conducting voluntary reductions in the second round comprise Algeria, Iraq, Kazakhstan, Kuwait, Oman, Russia, Saudi Arabia, the United Arab Emirates, and Gabon, with all participating except for Gabon in the subsequent round.
Furthermore, a higher production quota of 3.5 million bpd in 2025 has been allocated to the United Arab Emirates, surpassing the current level of 2.9 million bpd.
As part of the agreement, the deadline for an independent assessment of members’ production capabilities has been postponed to the conclusion of November 2025 from the initial set timeline of June 2024. These figures will serve as a benchmark for 2026 reference production levels.
The next OPEC+ meeting has been scheduled for December 1, 2024.
