In a joint effort led by Saudi Arabia and Russia, OPEC+ members have reached an agreement to prolong voluntary oil output cuts into the second quarter, providing additional support to the market amidst apprehensions about global economic growth. The decision was confirmed on Sunday during discussions among OPEC+ members.
Saudi Arabia, serving as the de facto leader of the Organization of the Petroleum Exporting Countries (OPEC), announced its commitment to extending the voluntary cut of 1 million barrels per day (bpd) until the end of June, maintaining its output at approximately 9 million bpd. The state news agency SPA reported that the gradual reversal of these cuts would be contingent on market conditions.
Russia, leading the OPEC allies collectively known as OPEC+, disclosed that it would reduce oil production and exports by an additional 471,000 bpd in the second quarter. This coordinated effort involves some OPEC+ participating countries, as stated by Russian Deputy Prime Minister Alexander Novak.
In November, OPEC+ initially agreed to voluntary cuts amounting to around 2.2 million bpd for the first quarter, spearheaded by Saudi Arabia’s continuation of its own voluntary cut.
Individual announcements from OPEC+ members outlined their contributions to the extended cuts. Iraq confirmed the extension of its 220,000 bpd output cut, the UAE prolonged its 163,000 bpd output cut, and Kuwait extended its 135,000 bpd output cut, according to separate statements from the three OPEC producers. Algeria and Oman also committed to reductions, with Algeria cutting by 51,000 bpd and Oman by 42,000 bpd.
Since late 2022, OPEC+ has implemented a series of output cuts to counterbalance the increased output from the United States and other non-member producers, as well as concerns over demand in major economies grappling with high interest rates.
While oil prices have received support from escalating geopolitical tensions, including attacks on Red Sea shipping by the Iran-aligned Houthi group, apprehensions about economic growth and high interest rates have exerted downward pressure. Brent LCOc1 futures for May settled at US$83.55 a barrel on Friday, marking a 2 percent increase.
Sources had previously indicated to Reuters that the extension of output cuts into the second quarter was under consideration, with one source deeming it “likely.” The outlook for oil demand this year remains uncertain, with OPEC anticipating relatively strong demand growth of 2.25 million bpd, led by Asia, while the International Energy Agency predicts slower growth at 1.22 million bpd.