OPEC+ extends oil output cuts to second quarter

OPEC+ producers extend oil output cuts to second quarter

/ 07:30 AM March 04, 2024

opec-producers-extend-oil-output-cuts-to-second-quarter

OPEC logo is seen in this illustration taken, Oct 8, 2023. REUTERS/Dado Ruvic/Illustration/File photo

DUBAI  OPEC+ members led by Saudi Arabia and Russia agreed on Sunday to extend voluntary oil output cuts of 2.2 million barrels per day into the second quarter, giving extra support to the market amid concerns over global growth and rising output outside the group.

Saudi Arabia, the de facto leader of the Organization of the Petroleum Exporting Countries (OPEC), said it would extend its voluntary cut of 1 million barrels per day (bpd) through the end of June, leaving its output at around 9 million bpd.

Article continues after this advertisement

Russia, which leads OPEC allies collectively known as OPEC+, will cut oil production and exports by an extra 471,000 bpd in the second quarter. Russian Deputy Prime Minister Alexander Novak gave new figures showing that cuts from production will make up a rising proportion of the measure.

FEATURED STORIES

Oil has found support in 2024 from rising geopolitical tensions and Houthi attacks on Red Sea shipping, although concern about economic growth has weighed. While OPEC+ was widely expected to keep the cuts in place, Russia’s announcement could bolster prices further.

READ: Oil rises almost 2% as markets await OPEC+ decision

Article continues after this advertisement

“There was a surprise from Russia,” said UBS analyst Giovanni Staunovo, who called the developments largely expected.

Article continues after this advertisement

“If the Russian cuts are fully implemented additional barrels would be removed from the market. So that is a surprise move no one expected and could lift prices,” he added.

Article continues after this advertisement

Brent crude settled $1.64 higher, or 2 percent, at $83.55 a barrel on Friday, up more than 8 percent so far this year.

Oil seen opening higher

OPEC+ members announced the cuts individually on Sunday and OPEC later issued a statement confirming the 2.2 million bpd total. Saudi state news agency SPA said the cuts would be reversed gradually, according to market conditions.

Article continues after this advertisement

“The decision sends a message of cohesion and confirms that the group in not in a hurry to return supply volumes, supporting the view that when this finally happens, it will be gradual,” analysts at investment bank Jefferies said in a report.

OPEC+ in November had agreed to the voluntary cuts totaling about 2.2 million bpd for the first quarter, led by Saudi Arabia rolling over a cut it had first made in July.

READ:OPEC+ agrees to deepen voluntary oil output cuts

“The rollover was anticipated but extending it to the end of the second quarter might come as a surprise,” said Tamas Varga of oil broker PVM. “The market is expected to open stronger.”

For the second quarter, Iraq will extend its 220,000 bpd output cut, UAE will keep in place its 163,000 bpd output cut and Kuwait will maintain its 135,000 bpd output cut, the three OPEC producers said in separate statements. Algeria also said it would cut by 51,000 bpd and Oman by 42,000 bpd.

Kazakhstan said it will extend its voluntary cuts of 82,000 bpd through the second quarter.

Non-OPEC suppliers to boost supply

OPEC+ has implemented a series of output cuts since late 2022 to support the market amid rising output from the United States and other non-member producers and worries over demand as major economies grapple with high interest rates.

READ: OPEC sticks to oil demand view, sees better economic growth

The total OPEC+ pledged cuts since 2022 stand at about 5.86 million bpd, equal to about 5.7 percent of daily world demand, according to Reuters calculations.

Sources told Reuters last week that OPEC+ would consider extending the latest round of output cuts into the second quarter, with one saying it was “likely”.

The oil demand outlook is uncertain for this year. OPEC expects another year of relatively strong demand growth of 2.25 million bpd, led by Asia, while the International Energy Agency expects much slower growth of 1.22 million bpd.

Your subscription could not be saved. Please try again.
Your subscription has been successful.

Subscribe to our daily newsletter

By providing an email address. I agree to the Terms of Use and acknowledge that I have read the Privacy Policy.

In a further headwind for OPEC+, the IEA also expects oil supply to grow to a record high of about 103.8 million bpd this year, almost entirely driven by producers outside OPEC+, including the United States, Brazil and Guyana.

TAGS: oil prices, OPEC+ output cut, supply and demand

Your subscription could not be saved. Please try again.
Your subscription has been successful.

Subscribe to our newsletter!

By providing an email address. I agree to the Terms of Use and acknowledge that I have read the Privacy Policy.

© Copyright 1997-2024 INQUIRER.net | All Rights Reserved

This is an information message

We use cookies to enhance your experience. By continuing, you agree to our use of cookies. Learn more here.