Citing worse-than-assumed economic data from China and the United States, eight members of OPEC+ that were scheduled to unwind their 2.2 million b/d of voluntary production cuts have agreed to delay their production hikes by two months.
Bearish sentiment has well and truly taken over oil markets, with oil prices barely reacting to the OPEC+ decision to postpone its plan to boost production. Usually, high-impact OPEC+ decisions trigger a notable reaction in the oil markets, but not this time. Sentiment has soured so much that the oil group’s decision to postpone the return of barrels they’ve cut in 2023 barely resonated at all, reinforcing fears that next year will see balances swinging heavily towards oversupply. As ICE Brent futures hover around $73 per barrel, oil prices are set to close this week at their lowest level since June 2023, OilPrice reported.
Saudi Arabia, Russia, Iraq, the United Arab Emirates, Kuwait, Kazakhstan, Algeria, and Oman extend voluntary cuts. The OPEC+ countries, which previously announced additional voluntary cuts in April and November 2023, including Saudi Arabia, Russia, Iraq, the United Arab Emirates, Kuwait, Kazakhstan, Algeria, and Oman, held a virtual meeting on September 5th, 2024, during which the eight member countries emphasized their collective resolve to ensure full compliance with the voluntary production adjustments. The group includes Iraq and Kazakhstan, who have overproduced since January 2024, but have strongly reaffirmed their commitment to the agreement and to their compensation schedules submitted to the OPEC Secretariat as agreed under the 53rd meeting of the JMMC on April 3rd 2024.
In August 2024, Saudi Arabia, Russia, the United Arab Emirates, Kuwait, Algeria, and Oman, conducted two ministerial discussions with Iraq and Kazakhstan. Both countries were urged to achieve full conformity and compensate for the overproduced volumes since January 2024. Iraq and Kazakhstan committed to engage with secondary sources to outline their plans for production adjustments to achieve compliance and meet the compensation schedules they submitted to the OPEC Secretariat on August 22nd.
Iraq and Kazakhstan reinforced their commitment during the OPEC Secretary General’s visits in late August, conducted in coordination with Saudi Arabia’s Minister of Energy and the Chairman of the OPEC and non-OPEC Ministerial Meetings. During those visits, the OPEC Secretariat organized workshops with the secondary sources where both countries provided extensive details on the immediate and concrete measures they are implementing to achieve full conformity with the required production levels and to meet their compensation schedules for August and for September. These measures included advancing field maintenance plans and reducing production alongside with delaying and canceling spot sales for the month of August. Moreover, the countries committed to adjust compensation plans for any over produced volumes in August.
In recognition of this strengthened resolve and renewed firm commitment, the eight participating countries have agreed to extend their additional voluntary production cuts of 2.2 million barrels per day for two months until the end of November 2024, after which these cuts will be gradually phased out on a monthly basis starting December 1st, 2024, according to the attached schedule, with the flexibility to pause or reverse the adjustments as necessary. The overproducing countries also reconfirmed their commitment that the entire overproduced volume will be fully compensated for by September 2025.
/OilPrice, OPEC/