OPEC+ extends crude output cuts amid market uncertainty

In an oil market facing uncertain demand growth but abundant supply, the OPEC+ alliance said on Dec. 5 it will postpone the easing of its production cuts for another quarter.

Under the plan, the gradual rollback of some 2.2 million b/d of voluntary curbs that had been set to begin in January will now be implemented from April, the OPEC secretariat said in a statement.

"This monthly increase can be paused or reversed subject to market conditions," the statement said.

Even the UAE, which has been among the most vocal within the group calling for more production and earlier secured a 300,000 b/d hike to its quota that was also to begin in January, agreed to delay phasing in that increase until the second quarter.

The group has struggled to influence prices, with output rising from the US, Brazil, Guyana and other rival producers, while many analysts have revised down their demand growth forecasts.

Still, officials within the group say they remain confident that the market will turn. Delaying the tapering of the cuts to April will take them past Q1 seasonal refinery maintenance and allow members to put barrels back on the market as demand rises, one OPEC source said on condition of anonymity.

"We assume these things will take their own time to make an impact," the source said. "There is an overreliance on short-term sentiment driving the market. Nobody is looking at the market from a true fundamentals point of view. Fundamentals will one day bite and bite badly."

Analysts with S&P Global Commodity Insights are less sanguine, saying delaying the cut tapering would not prevent a supply glut.

"Market fundamentals still point to crude oil supply growth outpacing demand growth for crude in 2025 -- even if OPEC+ keeps production flat," said Jim Burkhard, vice president of research for Commodity Insights.

OPEC ministers will convene again online Dec. 10, largely to deal with administrative matters related to the organization, the secretariat said. The next full OPEC+ meeting was set for May 28.

Prices were volatile in the aftermath of the group's announcements. At 1435 GMT, front-month ICE Brent futures were trading at $72.65/b, up 34 cents/b from the previous close.

Russian Deputy Prime Minister Alexander Novak said that the oil market is balanced and OPEC+ is contributing to market stability following the meeting.

"We are seeing a balance of supply and demand. This was the case both in the summer and today, in the winter. This is why a decision was taken at the ministerial meeting to maintain this balance," he said in an interview aired on the Russia 24 TV station.

The current OPEC+ supply pact has eight members -- Saudi Arabia, the UAE, Kuwait, Kazakhstan, Algeria, Oman, Iraq and Russia – making 2.2 million b/d of voluntary cuts since mid-2024.

Another 3.6 million b/d in cuts shared by the entire OPEC+ alliance was due to expire at the end of 2025 but has now been extended to the end of 2026, the secretariat said.

Compliance with the deal figures to remain a focal point for the group's monitoring committee, chaired by Saudi Arabia.

Iraq, Kazakstan and Russia have been the most significant overproducers above their quotas and owe so-called "compensation cuts" to make up for their excess volumes. That compensation had been due by the end of 2024, but they will now have until June 2026 to fulfill their commitments.

The extension followed visits by Saudi energy minister Prince Abdulaziz and Russian Deputy Prime Minister and OPEC+ envoy Alexander Novak to Iraq and Kazakhstan to meet with their leaders.

"They gave the assurance that if we do the extension, they will be more committed to deliver," an OPEC source said.

The group's communique said that participants "reiterated the importance of conforming to quotas and compensation mechanisms."

The agreements follow days of speculation about discord within the group, which had originally planned to meet in Vienna Dec. 1, but then moved the meeting online and delayed it until Dec. 5.

It could also amend plans announced Dec. 5 depending on market conditions and geopolitical developments in 2025.

"Ultimately, OPEC is between a rock and a hard place. While it wants to maintain a floor beneath oil prices, it is also craving an opportunity to claw back some of its market share," said BCA Research's Commodity and Energy Strategist Roukaya Ibrahim.

OPEC+ voluntary cutters' crude output targets for 2025