OPEC+ Extends its Extra Supply Cuts of 2.2 Million Barrels/Day Until the End of Q2 2024

OPEC+ Oil Supply Cuts Extension

The Organization of the Petroleum Exporting Countries (OPEC) and allies led by Russia, have implemented a series of output cuts since late-2022 to the tune of 5.86 million barrels per day (mbpd), to last until the end of 2024. The group known as OPEC+ agreed in October to additional voluntary cuts of 2.2 mbpd, for the first quarter of the current year.

On Sunday, members decided to rollover those extra cuts until the end of Q2, keeping the total supply curbs to nearly 5.9 mbpd. Saudi Arabia, the de facto leader of OPEC, is the biggest contributor and accounts for one million barrels of the cuts. Russia will curb supply by 471 thousand barrels in the second quarter, with most coming from production curbs and less from export restrictions. [1]

The output reduction program implemented by OPEC+ is a response to falling prices after in the second half of 2022, following the roughly twenty-two years peak earlier that year. The commodity lost ground in 2023, as the Q3 rebound was erased in the final quarter of the year.

Prices have found support in 2024 due to the war in the Middle East and the continued hostilities in the Red Sea, which along with the action of OPEC+, restrain supply. However, supply is a less potent upward driver than demand creation and things are not as encouraging around the latter.

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Based on its February report, OPEC believes that global demand growth this year will remain largely unchanged from 2023, at 2.25 million barrels per day. [2] The International Energy Agency (IEA) on the other hand, forecasts a sharp deceleration to 1.2 mbpd. Furthermore, the agency expects that higher global supply from non-OPEC+ producers "should more than eclipse the expected rise in world oil demand". [3]

Nikos Tzabouras

Senior Financial Editorial Writer

Nikos Tzabouras is a graduate of the Department of International & European Economic Studies at the Athens University of Economics and Business. He has a long time presence at FXCM, as he joined the company in 2011. He has served from multiple positions, but specializes in financial market analysis and commentary.

With his educational background in international relations, he emphasizes not only on Technical Analysis but also in Fundamental Analysis and Geopolitics – which have been having increasing impact on financial markets. He has longtime experience in market analysis and as a host of educational trading courses via online and in-person sessions and conferences.

References

1

Retrieved 03 Mar 2024 https://www.opec.org/opec_web/en/press_room/7305.htm

2

Retrieved 03 Mar 2024 https://www.opec.org/opec_web/en/publications/338.htm

3

Retrieved 21 Apr 2024 https://www.iea.org/reports/oil-market-report-february-2024

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