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Oil producer group Opec+ on Thursday significantly scaled back its plans for production in 2025 in an effort to support prices.
The group, led by Saudi Arabia and Russia, said it would push back a plan to start gradually reintroducing 2.2mn barrels a day (b/d) of crude until next April and would also extend to 18 months the period over which the increase would take place. The cartel had previously said it would start to reintroduce the oil from January.
The UAE has also agreed to postpone an increase of 300,000 b/d to its quota until April, Opec said on Thursday.
The overall result of the changes is that the group will pump 818,000 b/d less oil in 2025 than previously expected, said analysts, if members comply with their quotas.
“It takes a huge amount of oil out of the 2025 plan,” said Paul Horsnell, head of commodities at Standard Chartered. “It has been shunted back. Two-thirds of the oil they were expected to bring on [in 2025] is now expected in 2026.”
The price of benchmark Brent crude was up 0.3 per cent at $72.51 after the announcement, while its US equivalent, West Texas Intermediate, was also 0.3 per cent higher on the day at $68.73.
Opec’s move comes with oil having slid by nearly 11 per cent since just before its June meeting, when it had said it would gradually start unwinding the 2.2mn of voluntary cuts from September.
“We believe this is a very bullish deal as it removes the bulk of the crude oversupply for the next year,” said Amrita Sen, founder of the research consultancy Energy Aspects. “But the market believes [US president-elect Donald] Trump wants low oil prices and hence remains bearish.
The International Energy Agency had said in its November oil market report that non-Opec countries would increase oil production by 1.5mn b/d in 2025, and, even if Opec+ had left all of its production cuts in place, supply would exceed demand by “more than 1mn b/d” next year.
However, that extra supply would help cushion the market against multiple geopolitical risks, it had also said.
Helima Croft, at RBC Capital Markets, said the oil cartel had opted to play it safe by taking firm action.
“It’s Opec essentially saying that the prudent course of action is to continue to watch and wait for signs of what the health of demand outlook is. I think given the uncertainty in the market, Opec, as expected, opted to hit the pause button, watch and wait, and take up the issue come spring,” she said.
