OPEC+ prolongs significant oil output reductions until 2025
OPEC+ Commits to Major Oil Output Cuts Until 2025!
In a decision made on Sunday, OPEC+ has opted to continue the majority of its substantial oil production reductions until 2025.
This move aims to stabilize the market in light of sluggish demand growth, elevated interest rates, and increasing competition from the United States.
Recently, Brent crude oil prices have hovered close to $80 per barrel, a figure falling short of what many OPEC+ members require to balance their budgets. Concerns regarding sluggish demand growth in China, a leading oil importer, have contributed to this trend, alongside the increase in oil stocks in developed economies.
Since late 2022, the coalition known as OPEC+—comprising the Organization of the Petroleum Exporting Countries and led by Russia—has implemented a sequence of significant output reductions.
Currently, OPEC+ members are collectively reducing output by approximately 5.86 million barrels per day (bpd), equivalent to roughly 5.7% of global demand.
This includes 3.66 million bpd of cuts scheduled to terminate by the end of 2024, as well as voluntary reductions by eight members totaling 2.2 million bpd, set to conclude by the end of June 2024.
On Sunday, OPEC+ reached a consensus to prolong the cuts of 3.66 million bpd for an additional year, extending until the conclusion of 2025. Additionally, they decided to extend the reductions of 2.2 million bpd by three months, until the end of September 2024.
Furthermore, OPEC+ has outlined a plan to gradually scale back the cuts of 2.2 million bpd over a period of one year, starting from October 2024 and continuing until September 2025.
“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 Energy Minister Prince Abdulaziz bin Salman told reporters.
Some key ministers, primarily those involved in the voluntary cuts, were asked to convene in Riyadh on Sunday, despite most meetings being conducted online.
The countries participating in voluntary output reductions include Algeria, Iraq, Kazakhstan, Kuwait, Oman, Russia, Saudi Arabia, and the United Arab Emirates.
“It’s a significant demonstration of solidarity for the group and Prince Abdulaziz,” remarked Sen, highlighting that the agreement would alleviate concerns about Saudi Arabia increasing production due to Aramco’s share listing.
The Saudi Arabian government has initiated steps to sell a new stake in state oil giant Aramco, potentially raising up to $13.1 billion. This move represents a landmark deal to support Crown Prince Mohammed bin Salman’s economic diversification plan.
The next meeting of OPEC+ is scheduled for December 1, 2024.