Riyadh, Saudi Arabia – Oil-producing nations within the OPEC+ group, led by Saudi Arabia and Russia, have agreed to extend voluntary cuts to oil production for an additional three months in an effort to bolster prices. Despite ongoing geopolitical tensions, the decision was made to maintain the curbs until the end of June, according to reports from the Saudi Arabian state news agency.
These measures represent a continuation of a series of output reductions by OPEC+ members since 2022, aimed at supporting prices amidst challenges such as increased US production and sluggish global demand. The recent voluntary cuts, which took effect in January, have collectively lowered the production targets of members by approximately 2.2 million barrels per day.
While international benchmark Brent crude has seen a 6% increase and US equivalent WTI a nearly 8% rise since the announcement of the latest cuts in November, oil prices remain below the $100 per barrel threshold last observed in the summer of 2022. Various geopolitical factors, including the Israel-Hamas conflict and attacks on commercial shipping, have added pressure to the market.
Market analysts anticipated the decision to extend production cuts, with crude oil prices experiencing an increase in the week leading up to the announcement. Brent closed above $83 a barrel, up more than 2% from the previous week, while WTI finished just under $80 a barrel, marking a rise of over 4%.
OPEC+ aims to maintain market stability, with Saudi Arabia taking on the bulk of production cuts by reducing output by 1 million barrels per day since July. The country has adjusted its oil production plans, diverting from previous intentions to expand daily production capacity by 2027. Actions taken by Saudi Arabia have not gone unnoticed, particularly by the US, which raised concerns about potential impacts on inflation.
Members including Kuwait, Algeria, Oman, Iraq, and the United Arab Emirates have also confirmed their commitment to uphold voluntary production cuts. The upcoming semi-annual OPEC+ ministerial meeting on June 1 will be pivotal as analysts anticipate discussions on production policies for the second half of the year.
While member nations express a desire to reintroduce barrels to the market in the latter part of the year, the decision will be contingent on market conditions. The outlook for oil demand in 2022 remains uncertain, with varying projections from the IEA and OPEC on growth rates.