OPEC and its partners in OPEC+ this weekend decided to extend their production cuts, including both voluntary and group-wide cuts, until 2025.
Energy Intelligence's Amena Bakr reported that the voluntary cuts specifically would be extended until the third quarter of 2024, after which the countries currently cutting would begin to bring back production if the market conditions are right.
"We are waiting for interest rates to come down and a better trajectory when it comes to economic growth ... not pockets of growth here and there," Saudi Arabia's energy minister Abdulaziz bin Salman said, as quoted by Reuters, in comments on what market conditions OPEC would be looking for to start rolling back the cuts.
Oil prices slipped despite the news of the solid extension of the overall cuts, likely because most of the total cuts, which amount to some 3.66 million bpd, per Bakr, come from the voluntary scheme, totaling some 2.2 million bpd.
Another reason for the reaction of oil traders was probably the upward adjustment of the UAE's production quota. The OPEC member has been grumbling against the production cuts so the rest of the cartel raised its production baseline by 300,000 bpd at this weekend's meeting.
However, "The deal should allay market fears of OPEC+ adding back barrels at a time when demand concerns are still rife," Energy Aspects' Amrita Sen told Reuters.
The oil group has also delayed a discussion regarding the production baselines of other members until 2026, because, per Energy Intelligence's Bakr, "some countries like Russia are under embargo and the independent companies are not able to have access to data to support the assessment process" of production capacities.
"The communication of a surprisingly detailed default plan to unwind extra cuts makes it harder to maintain low production if the market turns out softer than bullish OPEC expectations," Goldman Sachs analysts wrote about the meeting's decisions, adding that "The communication of a gradual unwind reflects a strong desire to bring back production of several members given high spare capacity."
By Irina Slav for Oilprice.com
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Irina is a writer for Oilprice.com with over a decade of experience writing on the oil and gas industry. More
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Comments
Had OPEC+ decided to add more cuts it would have played into the hands of the United States by giving the impression that global oil demand is weakening.
Still, its solid market fundamentals and robust demand underpinned by Chinese record-breaking crude imports will soon prevail over market manipulation with Brent crude headed towards$90 a barrel.
Dr Mamdouh G Salameh
International Oil Economist
Global Energy Expert
Bring back Jeff Currie