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OPEC+ members led by Saudi Arabia and Russia have extended the latest round of voluntary oil production cuts for another three months, as they try to boost prices that have remained low despite ongoing geopolitical tensions.
The restrictions were scheduled to end at the end of March, but will now continue until the end of June, according to the Saudi Press Agency.
These measures are added to a series of production cuts by OPEC+ members since 2022 with the aim of supporting prices amid rising US production and tepid global demand. Since the latest voluntary cuts took effect in January, they have reduced members' combined production targets by about 2.2 million barrels per day.
Brent crude, the international benchmark, has risen by 6 percent and the US equivalent of West Texas Intermediate crude by about 8 percent since the latest cuts were first announced at the end of November.
But despite tensions in the Middle East, including the war between Israel and Hamas and attacks on commercial shipping by the Houthis, the price of oil remains well below the $100 per barrel level last seen in the summer of 2022.
Traders were largely anticipating the decision to extend restrictions, with crude oil prices rising last week before the announcement. Brent crude rose more than 2 percent last week to close above $83 a barrel on Friday, while West Texas Intermediate crude closed at just under $80 a barrel, up more than 4 percent.
Amrita Sen of Energy Aspects said OPEC+ is “trying to keep the market balanced.” Oil prices are much more stable. . . “But they want to ensure continued stability,” she added.
Saudi Arabia has borne most of the restrictions, reducing its production by one million barrels per day since July. In total, the kingdom is producing 2 million barrels per day less than in October 2022. In January, it abandoned plans to expand its daily oil production capacity by 2027 in a major policy shift.
The country needs an oil price near $100 a barrel to finance Crown Prince Mohammed bin Salman's ambitious economic reform program, but its efforts to cut production have not been welcomed by the United States, which is concerned about the effects on inflation.
Kuwait, Algeria, Oman, Iraq and the United Arab Emirates also confirmed that they will maintain voluntary production cuts.
Attention is now turning to the semi-annual meeting of OPEC+ ministers on June 1, where analysts expect the group to agree on production policy for the second half of the year.
Sen said member states “hope to add barrels back to the market” in the second half of this year. “But this is not a guarantee. It depends on market conditions. They will never add barrels to create a surplus in the market,” she added.
The prospects for oil demand this year are still unclear. The International Energy Agency expects oil demand to grow by 1.2 million barrels per day, about half the pace of 2023, while OPEC believes demand growth will be higher at 2.2 million barrels per day.
