OPEC+ Set to Extend Oil Output Cuts Amidst Market Uncertainty

OPEC+ is poised to announce an extension of its deep oil output cuts into 2024 and potentially 2025, aiming to stabilize the market amidst subdued global demand, elevated interest rates, and increasing U.S. production.

Current Market Dynamics:

Oil prices hover around $80 per barrel, falling short of the fiscal breakeven point for many OPEC+ members.

Lingering concerns over sluggish demand growth in China, the world’s top oil importer, continue to exert downward pressure on prices, prompting expectations for further output cuts by OPEC+.

Since late 2022, OPEC+ has implemented significant output reductions to rebalance the market. Members are collectively curtailing production by 5.86 million barrels per day (bpd), equivalent to approximately 5.7% of global demand.

Details of Current Cuts:

The ongoing cuts include 3.66 million bpd agreed upon by OPEC+ members, slated to extend until the end of 2024. Additionally, some members have voluntarily reduced output by 2.2 million bpd, with these cuts set to expire by the end of June.

The forthcoming agreement may extend either all or a portion of the 3.66 million bpd cuts into 2025. Similarly, voluntary cuts, ranging at 2.2 million bpd, could be prolonged into the latter half of 2024.

Participants and Meeting Format:

Key ministers from countries implementing voluntary cuts will be notable attendees of the upcoming meeting, scheduled for Sunday.

While the gathering will be conducted online, select ministers plan to convene in Riyadh, Saudi Arabia, underscoring the importance of the deliberations.