In a bid to stabilize global oil prices, OPEC+ nations, led by Saudi Arabia and Russia, have agreed to extend their voluntary oil production cuts of 2.2 million barrels per day until March 2024. The decision was announced on Thursday following a delayed virtual meeting amid internal disagreements within the group.
OPEC+ confirmed that the cuts, originally scheduled to phase out earlier, will gradually reduce on a monthly basis starting from April 2024 and continue until September 2026, contingent on market conditions.
“The extension buys the group some time,” said David Oxley, Chief Climate and Commodities Economist at Capital Economics, who warned that weak global oil demand could force OPEC+ into a similar position in the near future.
The production cuts come at a time when the global oil market faces an oversupply crisis. The International Energy Agency recently projected that even with OPEC+ restrictions, global oil supply would outpace demand by over one million barrels daily next year.
While Saudi Arabia and Russia aim to maintain high oil prices to support their economic strategies, dissenting voices within the group, such as Kazakhstan and the UAE, have expressed interest in increasing production, citing significant spare capacity.
Jorge Leon, an analyst at Rystad Energy, noted, “Production limits are effective only if respected. Earlier this year, Iraq and Kazakhstan were called out for exceeding their quotas.”
The decision also reflects broader challenges, including sluggish demand in China, the world’s largest oil importer, and potential policy shifts under the incoming U.S. administration.
As OPEC+ navigates these complex dynamics, analysts caution that the effectiveness of the extended cuts will hinge on compliance and evolving market conditions.
