LONDON/MOSCOW (Reuters) – OPEC+ is contemplating the extension of voluntary oil output cuts into the second quarter of the year, sources within the organization revealed to Reuters. The move aims to provide additional support to the market, and discussions are underway regarding the possibility of keeping these cuts in place until the end of the year, according to two informed sources.
In November of the previous year, the Organization of the Petroleum Exporting Countries (OPEC) and its allies, led by Russia, agreed to voluntary cuts totaling approximately 2.2 million barrels per day (bpd) for the first quarter of the current year. Saudi Arabia, in particular, extended its own voluntary cut as part of this agreement.
Oil prices have seen some buoyancy in the face of geopolitical tensions, including attacks by the Iran-aligned Houthi group on Red Sea shipping. However, concerns over economic growth and elevated interest rates have exerted downward pressure. As of Tuesday, Brent crude was hovering around $83 per barrel.
One of the OPEC+ sources, speaking on the condition of anonymity, expressed that the extension of output cuts into the second quarter is “likely.” Two other sources suggested that a more prolonged extension until the end of the year is being considered.
Responses from OPEC and the Saudi Energy Ministry are pending, as they did not immediately address requests for comments. Under the current agreement, the collective cuts by the OPEC+ group are scheduled to reduce by 3.66 million bpd from the beginning of April.
While OPEC+’s de facto leader, Saudi Arabia, has mentioned the possibility of continuing the cuts beyond the first quarter if necessary, formal discussions on this matter within OPEC+ are yet to take place, according to two sources. A decision on the extension is anticipated in the first week of March, with individual countries expected to announce their stances.
OPEC+ initiated a series of output cuts since late 2022 to stabilize the market amidst escalating production from the United States and other non-member producers. Concerns over demand persist as major economies grapple with high-interest rates aimed at curbing persistent inflation.
Complicating matters for OPEC+, the U.S. has emerged as the primary European oil and liquefied natural gas supplier following sanctions on Russia and disruptions in Middle East supply due to Red Sea attacks. The outlook for oil demand in 2024 remains uncertain, with OPEC forecasting relatively robust demand growth of 2.25 million bpd, led by Asia, while the International Energy Agency anticipates slower growth at 1.22 million bpd.