OPEC+ is working on a complex deal expected to be finalized at its meeting on Sunday, aiming to extend some of its substantial oil production cuts into 2025, according to sources cited by Reuters.
The Organization of the Petroleum Exporting Countries, led by Saudi Arabia, and its allies, led by Russia, have made a series of cuts since late 2022 in response to rising output from non-member countries, particularly the United States, and concerns over global demand due to high interest rates aimed at curbing inflation.
Currently, OPEC+ is reducing output by a total of 5.86 million barrels per day (bpd), which equates to about 5.7% of global demand. This includes 3.66 million bpd cuts by OPEC+ members valid through the end of 2024, and 2.2 million bpd of voluntary cuts by some members set to expire at the end of June.
The new deal on Sunday may extend some or all of the 3.66 million bpd cuts into 2025 and some or all of the 2.2 million bpd voluntary cuts into the third or fourth quarter of 2024. However, this extension is likely to be conditional on OPEC+ agreeing to new individual member output capacity figures later in 2024.
OPEC+ plans to start a series of online meetings at 1100 GMT on Sunday to finalize these agreements.
According to Reuters, the extension may hinge on new production capacity figures for member countries, which has been a contentious issue in the past due to differing national capacities.
The voluntary cuts by Algeria, Iraq, Kazakhstan, Kuwait, Oman, Russia, Saudi Arabia, and the United Arab Emirates have been deeper than those agreed with the wider group, highlighting internal dynamics and strategic decisions within OPEC+.
“If the cuts are indeed extended into 2025 that will also raise the issue of the group’s planned capacity audit and baseline reset, which likely won’t be settled until later this year,” said Rory Johnston, founder of oil research service Commodity Context.
“We would not entirely rule out a plot twist – in the form of a deeper cut – given (Saudi energy minister) Prince Abdulaziz’s (bin Salman) penchant for Hollywood twist endings,” said Helima Croft from RBC Capital Markets.
