Vienna December 5 2024: OPEC+ on Thursday pushed back the start of oil output rises by three months until April and extended the full unwinding of cuts by a year until the end of 2026 due to weak demand and booming production outside the group.
OPEC+, which pumps about half the world’s oil, had been planning to start unwinding cuts from October 2024 but a slowdown in global demand and rising output elsewhere forced it to postpone the plans on several occasions.
OPEC+ groups the Organization of the Petroleum Exporting Countries and allies such as Russia.
Despite the group’s supply cuts, global oil benchmark Brent crude has mostly stayed in a $70 to $80 per barrel range this year. On Thursday it traded near $72 a barrel, having hit a 2024 low below $69 in September.
“They have been talking about this (output hike) since June but they are still delaying,” said Bjarne Schieldrop, chief commodities analyst at SEB. “This means there is no upside to the oil price in the next couple of years.”
Schieldrop said the oil market will now shift focus to the actions of U.S. President-elect Donald Trump, who could impose new sanctions on Iran, tariffs on China and has pledged an end to the war in Ukraine.
Amrita Sen from Energy Aspects said the OPEC+ decision was bullish as it removed the bulk of oversupply for next year: “But the market believes Trump wants low oil prices and hence remains bearish despite the OPEC+ announcement”.
During his previous term as U.S. President in 2017-2021, Trump repeatedly attacked OPEC+ for high oil prices and asked Saudi Arabia to release more oil if the kingdom wanted U.S. support against its arch-rival Iran.
DEEP CUTS
OPEC+ members are holding back 5.86 million barrels per day of output, or about 5.7% of global demand, in a series of steps agreed since 2022 to support the market.
The steps include cuts of 2 million bpd by the whole group, 1.65 million bpd of first stage of voluntary cuts by eight members and another 2.2 million of second stage of voluntary cuts by the same eight members.
On Thursday, OPEC+ agreed to extend the 2 million bpd and the 1.65 million bpd of cuts until the end of 2026 from the end of 2025, according to statements issued by the group.
The gradual unwinding of 2.2 million of cuts will start from April 2025 with monthly increases of 138,000 bpd, according to Reuters calculations, and lasting 18 months until September 2026.
The group had previously planned to unwind the 2.2 million cut over 12 months through monthly output increases of 180,000 bpd.
OPEC+ also agreed to allow the United Arab Emirates to raise output by 300,000 bpd gradually from April until the end of September 2026, instead of the earlier plan to start it in January 2025.
