8 OPEC+ countries to extend voluntary supply cuts to support prices

In a set of ministerial meetings online and in person in Riyadh, Saudi Arabia, OPEC+ countries decided that eight of them would prolong approximately 2.2 million bbl/day in voluntary supply cuts for another quarter, to the end of September 2024.

The 2.2 million bbl/day in voluntary cuts are in addition to supply restraints imposed by mutually agreed output quotas or required production levels for 2024 for all participating OPEC+ members. Those quotas for the remainder of the year have not changed.

OPEC+ also decided that quotas for 2025 will remain unchanged for all but a single country. The United Arab Emirates will get an additional 300,000 bbl/day allocation to 3.519 million bbl/day, with the caveat that the country would only gradually raise its output over the first nine months of the year.

“It is complicated but not complex,” Bhushan Bahree, Executive Director, S&P Global Commodity Insights, stated. “OPEC+ member countries would like to start increasing oil production without negatively impacting prices. They cannot do that just yet. The need for more OPEC+ oil on a durable basis in the near future is not immediately evident, and the group’s ministers reflected that in their latest decisions on supply to markets.”

Beginning in October, the eight countries voluntarily cutting output – Saudi Arabia, Russia, Iraq, the United Arab Emirates, Kuwait, Algeria, Kazakhstan and Oman – may start increasing their output gradually, by the month if feasible, depending on market conditions, and possibly taking as long as 12 months to fully undo the cuts. There is a table of proposed monthly increases specifying the proposed increases if they become feasible. Such timetables are statements of intent and subject, as always, to adjustment as market conditions change.

“This time around, the timetable is a message to markets that these countries are willing to at least stay the course — even if disinclined to cut output further — to support prices by continuing to restrain their output for longer if necessary. At least for a time, anyway,” said Paul Tossetti, Executive Director, S&P Global Commodity Insights.

Much will depend on how much of growth in demand for oil is satisfied by increasing supply from non-OPEC+ oil producers such as the United States, Canada, Brazil, Guyana and newcomers on the scene such as Niger.

“Two years ago at this time, OPEC+ output was 2.2 million bbl/day higher than it is now,” Mr Bahree said. “Total non-OPEC+ crude oil output is 3.1 million (bbl/day) higher now, with more than half that growth coming from the United States alone. Put another way, OPEC+ has had to make room for the rising output of others or face downward pressure on prices.”