OPEC+ delays plan to ease crude oil output cuts by one month

The eight OPEC+ countries implementing 2.2 million b/d in voluntary crude oil production cuts have again postponed plans to start phasing them out and will now keep them in place through the end of December.

The OPEC secretariat announced the move by the eight voluntary cutters – Saudi Arabia, Russia, Iraq, the United Arab Emirates, Kuwait, Kazakhstan, Algeria, and Oman – in a Nov. 3 statement without elaborating on the reasons. It comes two days before the too-close-to-call presidential election in the US, where oil prices long have been a politically sensitive topic.

The OPEC+ countries also “reiterated their collective commitment to achieve full conformity with the Declaration of Cooperation, including the additional voluntary production adjustments…and to fully compensate by September 2025 for the overproduced volumes since January 2024,” the secretariat said.

With the announcement, key Middle East members' national oil companies will be able to set their official selling prices for December loadings and allocate term volumes in the coming days.

The alliance has been scrambling to shore up the oil market in recent months, with tepid Chinese demand growth, high interest rates around the world, increased non-OPEC+ production, particularly in the Americas, and quota busting by key members such as Iraq and Kazakhstan putting downward pressure on oil prices.

Meanwhile signs of recent restraint between Israel and Iran after a series of tit-for-tat attacks have cut the so-called geopolitical risk premium.

Platts, part of S&P Global Commodity Insights, assessed Dated Brent at $74.17/b on Nov. 1, down from $81.20/b on Oct. 7, while OPEC has over the past several months downgraded its estimates of how much OPEC+ crude will be needed to balance global supply with demand.

OPEC has pegged the so-called 'call on OPEC+ crude' at 42.8 million b/d for 2024 and 43.2 million b/d for 2025, still far above the alliance’s output of 40.10 million b/d in September, according to secondary sources used by the group to monitor member production.

This marks the second time the cut tapering has been pushed back. The eight producers had been due to start unravelling the cuts on Oct. 1, subject to market conditions, but in September opted to delay the taper until the start of December.

The group will now boost crude output gradually from January over the course of a year, starting with a collective 180,000 b/d.

OPEC+ ministers are next scheduled to meet in Vienna on Dec. 1.

The 2.2 million b/d of voluntary cuts are among 5.8 million b/d of group-wide reductions designed to shore up the oil market, which have cost the alliance market share.

In its statement, OPEC said the countries “also noted the recent announcement made by Iraq and the joint statement made by Russia and Kazakhstan, in which they strongly reaffirmed their commitment to the agreement including the additional voluntary production adjustments and to their compensation schedules for the overproduced volumes since January 2024.”

On Nov. 1, following a call between Russia’s and Kazakhstan’s energy ministers, the countries said they would submit new “compensation plans” to make up for excess production this year.

OPEC sources have told Commodity Insights that oil inventories would be lower, and the market tighter, had the group’s members stuck to their production targets this year.