A general view of signage at the headquarters of the Organization of the Petroleum Exporting Countries (OPEC) on Feb. 29, 2024 in Vienna, Austria.
Thomas Kronsteiner | Getty Images News | Getty Images
The influential Organization of the Petroleum Exporting Countries and its allies, collectively known as OPEC+, on Sunday agreed to extend their official crude output cuts into 2025, also stretching two other sets of supply curbs over different periods.
The decision came in line with the forecasts of analysts and OPEC+ delegates who told CNBC prior to the meeting that the alliance would likely extend its existing cuts.
Under official policy, the coalition will produce a combined 39.725 million barrels per day next year, according to a table published by the OPEC Secretariat. The figure marks the production levels required of individual members before applying any additional production adjustments and factors in the group departure of long-standing OPEC member Angola earlier this January.
It also includes an increase in the UAE output by 300,000 barrels per day, which will be phased in gradually starting January 2025 until the end of September next year.
In a Google-translated statement carried by the state-owned Saudi Press Agency, a subset of the OPEC+ alliance, including kingpins Saudi Arabia and Russia, said they would extend a set of nearly 1.7 million barrels per day of voluntary cuts that were set to expire at the end of this year. These reductions will now be implemented throughout 2025.
This smaller group of OPEC+ member will also stretch another round of voluntary output cuts totalling 2.2 million barrels per day until the end of the third quarter of this year. These trims were initially only scheduled to last until the end of the second quarter.
“The quantities of this reduction, amounting to 2.2 million barrels per day, will then be restored gradually, on a monthly basis, until the end of September 2025,” the statement said.
A group of ministers representing the countries that are implementing voluntary cuts convened in Saudi capital Riyadh for talks on June 2, coinciding with the broader OPEC, OPEC+ and coalition technical meetings of the same day. During a Sunday press briefing, Saudi Energy Minister Abdulaziz bin Salman stressed that this meeting was not the result of any tensions between members, but was called “to make sure that we interact with each other, to ensure that the messaging is comprehensively understood and agreed upon.”
He noted that, unlike the two existing OPEC+ compliance and market study committees, this group of eight voluntary cutters “is not supposed to be institutionalized.”
Demand in sight
The group’s attention has shifted toward supply-demand balances amid the seasonal start of the summer driving season and the end of refinery maintenance in the world’s largest crude importer, China. Institution views sharply diverge, with OPEC’s latest Monthly Oil Market Report of May forecasting a 2.25 million barrel-per-day increase this year. The Paris-based International Energy Agency’s Oil Market Report of last month meanwhile points to just a 1.06 million-barrel-per-day demand hike.
Saudi Arabia’s Abdulaziz bin Salman, who chairs the OPEC+ coalition, said Sunday that there is no “rocket science” to forecasts and acknowledged that, where the OPEC report may be making a “higher assessment” on the call for crude, there are likewise “those who are also taking a very pessimistic view on demand.” He flagged that the OPEC+ group is approaching supply-demand considerations with prudence and precaution, saying of the prospect of impending market tightness, “I will believe it when I see it.”
OPEC+ ministers will next meet to discuss policy steps on Dec. 1.
