The Organization of the Petroleum Exporting Countries (OPEC) and the coalition of non-OPEC oil-producing countries including Russia, known as OPEC Plus (OPEC+), have decided to delay by one year the planned lifting of crude oil production cuts originally scheduled for next year. This decision comes amid expectations that crude oil demand will decrease next year, potentially leading to a drop in oil prices.
According to major foreign media such as Bloomberg, OPEC+ held an online meeting on the 5th (local time) and announced that the resumption of oil production increases will be postponed. The existing production cut policy will be maintained not until next year as initially planned by OPEC+, but until 2026.
Since August 2022, OPEC+ has continued production cuts to support oil prices following a previous increase in output. The coalition, consisting of 23 countries, operates three production cut programs. These include an official cut of 2 million barrels per day followed by all OPEC+ members, and two voluntary cuts implemented by eight leading OPEC+ countries including Saudi Arabia. The voluntary cuts are divided into Stage 1, with 1.65 million barrels per day, and Stage 2, with 2.2 million barrels per day.
On this day, OPEC+ decided to extend the completion date for the official cuts and Stage 1 voluntary cuts from the end of next year to the end of 2026. Regarding Stage 2 voluntary cuts, the plan to reduce the cut volume starting January next year was also postponed by three months. OPEC+ agreed to begin easing cuts from April next year, gradually reducing the cut volume by an average of 138,000 barrels per day over 18 months.
This extension of production cuts by OPEC+ is interpreted as a measure to prevent a decline in oil prices. Initially, OPEC+ had planned to gradually increase production starting last October, but persistent downward pressure on oil prices has delayed this. Recent oil market reports have lowered the forecast for next year’s oil demand growth from 1.85 million barrels per day to 1.54 million barrels per day, citing factors such as China’s economic slowdown. Additionally, concerns over price declines have intensified amid expectations that Donald Trump, the U.S. president-elect, will adopt policies to increase U.S. oil production.
If the extension of production cuts had not been agreed upon, some oil-producing countries might have publicly increased production starting January next year. There were concerns that countries like Kazakhstan, motivated by oil field development, might break their production commitments.
Despite OPEC+’s decision, international oil prices fell slightly on the day. On the New York Mercantile Exchange, the near-month January delivery West Texas Intermediate (WTI) crude oil closed at $68.30 per barrel, down $0.24 (0.35%) from the previous session. The global benchmark Brent crude also closed down $0.22 (0.30%) at $72.09 per barrel. Market analysts suggest that since this move was already anticipated, the decision rather confirmed the weakness in global oil demand.
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