In a bid to stabilize the volatile oil market, OPEC+ members have agreed on voluntary production cuts totaling approximately 2.2 million barrels per day (bpd) for early next year. Led by Saudi Arabia, the decision aims to address concerns of a potential surplus and maintain oil price stability.
The agreement, announced after an online meeting among major oil-producing nations, includes various voluntary reductions from eight producers, highlighting the commitment of key players to support market balance. Notably, Saudi Arabia plans to roll over its existing voluntary cut of 1 million bpd, maintaining it through the first quarter of 2024.
While this move was expected to bolster market confidence, global benchmark oil prices experienced a 2% decline post-announcement. Analysts attribute this reaction to investor skepticism regarding the full impact of these voluntary cuts, Reuters news report said.
The discussions focused on 2024 output amid forecasts predicting a potential surplus. The International Energy Agency (IEA) highlighted expectations of a slowdown in demand growth for 2024 due to multiple factors, including advancements in energy efficiency and the lingering effects of the pandemic’s economic rebound.
Among the key contributors to the voluntary cuts, Russia announced an additional 200,000 bpd reduction in its supply for the first quarter of 2024. Other countries, including the UAE, Iraq, Kuwait, Kazakhstan, and Algeria, have also pledged supplementary production cuts during this period, signifying a collective effort to stabilize oil prices.
The meeting coincided with the invitation extended to Brazil, a significant oil producer, to join the OPEC+ alliance. Brazil’s potential membership is expected to further strengthen the group’s position and influence in global oil market dynamics.
However, these voluntary reductions contrast with formal OPEC+ adjustments of quota levels, keeping official market shares unchanged within the coalition. The final assessment of the real impact on supply reduction remains pending, as countries have individually announced their cuts.
Amidst concerns over market conditions and economic growth, the decision to implement additional cuts reflects the members’ concerted efforts to support price stability in the face of uncertainties in the global oil market.
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The reductions are voluntary rather than formal OPEC+ adjustments of quota levels — meaning market shares within OPEC+ remain officially unchanged. The final tally of nominal cuts is not yet in — countries have been announcing them individually — nor therefore are assessments of real supply reductions.
At the top of the list is Saudi Arabia, which said it would prolong its unilateral cut of 1 mb/d through the first quarter of 2024. Because this cut has been in place since July 2023, as noted above, it will not reduce oil supply from current levels.
Russia announced it would voluntarily cut an additional 200,000 b/d of supply, bringing its total reduction to 500,000 b/d in Q1 2024. The reduction will be from an average level of exports in May and June 2023 and will consist of 300,000 b/d of crude and 200,000 b/d of refined products.
In addition, so far Iraq, the UAE, Kuwait and Algeria among OPEC members have pledged additional production cuts in 1Q 2024 — they are, respectively, 223,000 b/d, 163,000 b/d, 135,000 b/d, and 51,000 b/d. Non-OPEC members Kazakhstan and Oman have pledged to cut production in the same period by 82,000 b/d and 42,000 b/d respectively.