The members of OPEC+ agreed to extend the voluntary cuts by three more months for an attempt to stabilize the world oil market. The resolution came after a virtual meeting which took place on the fringes of the 38th OPEC and non-OPEC Ministerial Meeting which was held on December 5, 2024. This would ensure that supply adjustments are maintained at present levels until March 2025.
The group, comprising major oil producers like Saudi Arabia and Russia, will continue maintaining the additional voluntary cut of 2.2 million bpd until the end of March 2025. The terms of the agreement have been carried forward in the same fashion as that agreed on in November 2023. From March, the group will reduce the 2.2 million bpd cut in a monthly fashion, which is expected to be completely rolled back by September 2026. However, the roll back may be changed or even reversed in case of favorable market conditions.
The OPEC+ countries have been withholding 5.86 million bpd, or around 5.7 percent of global oil demand, in a series of coordinated cuts since 2022. The measures are aimed at averting oversupply and maintaining higher oil prices, which have been trading between $70 and $80 per barrel for much of 2024. As of Thursday, the global benchmark for Brent crude stood at $72 per barrel, having touched a low of less than $69 in September.
The group said in its statement that full compliance with agreed production levels is essential and it also welcomed pledges by countries exceeding production quotas to get their output aligned with agreed levels. Countries that are supposed to be overproducing should submit their compensation schedules of volumes that have been overproduced since January 2024 to the OPEC Secretariat by the end of this month.
Additionally, the agreement approved an update to the UAE’s supply plan. The UAE will be permitted to increase production by 300,000 bpd starting from April 2025 and with its ramp-up until the end of September 2026. That has moved the timeline up one quarter, which had been to start in January 2025. These adjustments mark OPEC+’s continued intent to balance the global oil market and ensure long-term stability in prices amidst a turbulent global economic environment.
