OPEC+ sticks with oil production cuts for first quarter

Grant Smith, Salma El Wardany and Nayla Razzouk, Bloomberg February 01, 2024

(WO) – OPEC+ signaled it will stick with oil production cutbacks this quarter, as the group seeks to avert a surplus and buoy prices.

A panel of key members led by Saudi Arabia recommended no policy changes at an online review meeting on Thursday, according to delegates who asked not to be identified.

OPEC and its partners have pledged roughly 900,000 bpd of additional production curbs for the first quarter as global demand growth slows and rival supplies, led by the U.S., continue to climb.

OPEC+ reaffirmed its “readiness to take additional measures at any time,” the Joint Ministerial Monitoring Committee said in a statement on the group’s website. The committee is scheduled to meet again on April 3.

Saudi Energy Minister Prince Abdulaziz bin Salman has said the current OPEC+ curbs could “absolutely” be prolonged beyond the first quarter if needed. That decision would need to be made before the next JMMC, one delegate said. The current round of additional oil production curbs wasn’t formally announced at an OPEC+ meeting, but came in separate statements from member countries that was later “noted” by the cartel.

Initial export data suggest the group has made a slow start on its latest cuts, and oil markets remain fragile. Brent crude futures have seen only limited gains this year, holding just above $80 a bbl even as conflict rages in the Middle East and shipping in the Red Sea comes under attack.

Estimates from the International Energy Agency suggest that world oil markets will tip back into surplus next quarter, and remain oversupplied for the rest of the year, if OPEC+ relaxes the curbs and revives production.

While world oil demand is set to reach a record of around 103 MMbpd this year, the pace of growth is decelerating, and being met with a vigorous increase in supplies outside the group. U.S. production is hitting unprecedented levels thanks to a resurgence in shale drilling, while Guyana and Brazil are also expanding.

OPEC’s biggest member also indicated some doubts over the medium-term outlook this week, with Saudi Aramco abandoning plans to bolster oil production capacity by 1 MMbpd, or about 8%, by 2027. 

The full 22-nation OPEC+ alliance is due to meet at its Vienna headquarters on June 1 to discuss output policy for the second half of the year.

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