The Organisation of Petroleum Exporting Countries and their allies, also known as OPEC+, at a meeting on Sunday decided to extend production cuts, which started in December 2022, to the end of 2025.
The group-wide cuts, which were set to end in December this year, will now extend to the end of 2025, according to a statement released by the group. Besides these, the voluntary production cuts of 2.2 million barrels per day, which are being undertaken by a few member countries, are set to continue till the end of 2024.
The group was widely expected to extend production cuts, which have helped to keep oil prices from falling sharply amidst concerns about demand. As of last close, brent crude settled at $81.37 dollars to the barrel.
Cumulatively, OPEC+ members are currently cutting output by a 5.86 million barrels per day. The voluntary cuts are being undertaken by Algeria, Iraq, Kuwait, Kazakhstan, Oman, Russia, Saudi Arabia and United Arab Emirates, and it was due to expire in June.
In an interesting development, United Arab Emirates has been allowed 300,000 barrels a day increase in production in phases starting January 2025.
Decision Unlikely To Impact Crude Prices
The decision of oil producing and exporting countries is unlikely to have considerable impact on crude prices that have remained steady despite the production cuts and geo-political concerns in West Asia and due to the Russia Ukraine war.
“The extension of current production cuts was priced in, and even the extension of group-wide cuts to 2025 are not going to have any impact on crude prices,” Vandana Hari, founder of consultancy firm VandaInsights said.
Crude prices had briefly risen to $91 per barrel in April on the back of the conflict in West Asia, when it threatened regional exports, however since then prices have declined.
“Given lower demand prospects, I am confident that the crude will hover around current levels of $82-85 per barrel despite geopolitical concerns,” Ashwin Jacob, Partner, Energy at Deloitte India told NDTV Profit last week.
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