A view shows the logo of Organization of the Petroleum Exporting Countries (OPEC) during the United Nations climate change conference COP29, in Baku, Azerbaijan November 13, 2024.
Maxim Shemetov | Reuters
OPEC+ countries on Wednesday agreed to leave their formal output quotas unchanged, with market focus shifting toward potential increases from an eight-member subset of the alliance that had been carrying out separate voluntary production cuts.
The OPEC+ coalition has been operating a spate of formal production agreements that bind all members unanimously, along with two output cuts that are only informally tackled by an eight-member subset of the organization. Under formal policy, the entire OPEC+ group is cutting roughly 2 million barrels per day until the end of 2026.
On Wednesday, OPEC+ nations said they agreed to “reaffirm the level of overall crude oil production for OPEC and non-OPEC Participating Countries” as agreed during the alliance’s December meeting.
Separate from formal policy, OPEC+ heavyweight Russia and Saudi Arabia, alongside Algeria, Iraq, Kazakhstan, Kuwait, Oman and the United Arab Emirates, are also trimming production by 1.66 million barrels per day until the end of next year, under one opt-in agreement.
Until the end of March, these eight members also implemented a second combined 2.2 million-barrel-per day voluntary production decline, which they have begun to gradually unwind in the months since. As of the latest announcements, these nations are set to bring back a combined roughly 1 million barrels per day of their previously cut volumes over April-June and will be assessing further production steps over the weekend.
The timing of these hikes has coincided with increasing concern within the OPEC+ group that some members — which have in the past included the likes of Kazakhstan, Iraq and Russia — were not respecting their production quotas.
“This group is doing its best, but it’s not enough only this group, we need the help of others,” UAE Energy Minister Suhail Mohamed al-Mazrouei said Tuesday in a World Utilities Congress panel moderated by CNBC’s Dan Murphy.
On Wednesday, OPEC+ nations called on the OPEC Secretariat to assess each country’s sustainable production capacity to determine their baselines for 2027 — levels used to calculate coalition members’ output quotas under OPEC+ agreements.
OPEC+ members will next hold a ministerial meeting on Nov. 30.
Oil prices were in positive territory shortly after the ending of the OPEC+ meeting. The Ice Brent contract with July expiry was at $65.06 per barrel at 4:30 p.m. London time, up 1.5% from the Tuesday close price. Front-month July Nymex WTI futures were trading at $61.96 per barrel, up 1.76% from the previous day’s settlement.
Summer spikes
Oil demand typically spikes during the summer with the start of the travel season and additional crude burn to produce electricity for air conditioning needs in several Middle Eastern countries.
In a note out earlier this week, UBS Strategist Giovanni Staunovo flagged a “closely balanced oil market” in the first quarter of this year, compared with a vast projected supply surplus.
“We expect further demand and supply revisions with more incoming data,” Staunovo said. “With demand seasonally rising and the eight OPEC+ member states with additional voluntary cuts likely still adding more barrels to the market in July, we look for oil prices to move sideways in a USD 60-70/bbl range over the coming months.”
The UAE’s al-Mazrouei echoed this sentiment, flagging, “We need to be mindful of the demand. Demand is picking up. And demand is going to surprise us, if we’re not investing enough.”