In a decisive move to address concerns of a potential oil surplus in the market, OPEC+ oil producers have unanimously agreed to voluntary output cuts totaling almost 2 million barrels per day (bpd) for the early part of 2024. The agreement, reached during a virtual meeting on Thursday, saw major oil-producing nations, including Saudi Arabia and Russia, opting for individual voluntary reductions in the absence of a collective group cut.
While the failure to secure a group-wide production cut initially led to a dip in oil prices, which had earlier risen by over 1%, the subsequent commitment to individual voluntary cuts has tempered the market response. At 17:47 GMT, Benchmark Brent crude for February futures experienced a 1.6% decrease, settling at $81.52 a barrel. The front-month January contract is set to expire on Thursday.
Saudi Arabia, the leading participant in OPEC+, confirmed the extension of its voluntary cut for the first quarter of 2024. Russian Deputy Prime Minister Alexander Novak announced that Russia’s voluntary reduction would also persist during the same period, amounting to 500,000 bpd inclusive of both crude and products.
In a noteworthy development, OPEC+ extended an invitation to Brazil, a Top 10 oil producer, to join the group. Brazil’s energy minister expressed optimism about the country’s participation, stating their intent to become a member in January.
During the meeting, which convened to discuss 2024 output strategies, concerns regarding a potential surplus in the market were at the forefront. With a current output of approximately 43 million bpd, OPEC+ has already implemented cuts of about 5 million bpd to bolster prices and stabilize the market.
Apart from Saudi Arabia and Russia, other OPEC+ members, including Algeria and Kazakhstan, also confirmed their commitment to voluntary cuts. Algeria’s energy minister revealed a reduction of 50,000 bpd, while Kazakhstan announced an additional cut of 82,000 bpd for the first quarter.
The consensus among OPEC+ nations is to gradually unwind these cuts after the initial quarter, contingent on market conditions. The move comes as oil prices, which were near $98 in late September, have seen a decline. Concerns about weaker economic growth in 2024 and the anticipation of a supply surplus have prompted the alliance’s focus on reducing output.
The meeting also coincided with the commencement of the United Nations’ COP28 climate summit, hosted by the United Arab Emirates, an OPEC member. The juxtaposition of these events underscores the complex interplay between global energy policy and environmental considerations in the ongoing discussions within the oil-producing nations.