OPEC+ members, led by Saudi Arabia and Russia, have agreed to extend voluntary oil output cuts of 2.2 million barrels per day into the second quarter, with Saudi Arabia maintaining a cut of 1 million barrels per day and Russia deepening its cuts. The decision aims to provide support to the global oil market amidst concerns over economic growth and rising output from non-OPEC+ producers. The move is expected to open oil trading stronger and signals the group's commitment to gradual supply increases based on market conditions.
OPEC+ has agreed to voluntary oil output cuts totaling about 2.2 million barrels per day (bpd) for early next year, with Saudi Arabia rolling over its current voluntary cut and Russia cutting 500,000 bpd. The group also invited Brazil to join. Oil prices initially rose but later fell, reflecting doubts about the effectiveness of the cuts. OPEC+ is focused on lower output due to concerns over weaker economic growth and expectations of a supply surplus.
The International Energy Agency (IEA) stated that the extended oil output cuts by OPEC+ members, Saudi Arabia and Russia, until the end of 2023 will result in a significant market deficit in the fourth quarter. Despite concerns about economic recovery and high interest rates, the IEA remains optimistic about Chinese oil demand. However, the lack of cuts at the start of next year could lead to a surplus, with stocks at uncomfortably low levels, increasing the risk of volatility. Forecasts for global demand and supply vary among different organizations, highlighting the challenges of accurate forecasting in the oil market.
The International Energy Agency (IEA) has warned that the surprise oil output cuts from the OPEC+ producer group could worsen the projected supply deficit and derail the economic recovery. The IEA said that the energy alliance's "precautionary move" could spell bad news for consumers at a time of heightened economic uncertainty. The cuts add to Russia's existing plans to trim 500,000 barrels per day of its production from March until at least the end of the year. The combined voluntary cuts of OPEC+ members will be in excess of 1.6 million barrels per day.
