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Opec+ members, led by Saudi Arabia and Russia, have extended the latest round of voluntary cuts in oil production for another three months as they try to prop up prices that remain low despite ongoing geopolitical tensions.
The bans were due to expire at the end of March, but say they will continue until the end of June Saudi Arabia's state news agency.
The measures add to a series of output cuts by Opec+ members from 2022, designed to support prices amid tepid US production and warm global demand. They have reduced members' combined production targets by about 2.2 million barrels per day since the latest voluntary cuts took effect in January.
“The result sends a message of consistency and confirms that the group is in no rush to return to supply levels, supporting the view that when this finally happens, it will be gradual,” Jefferies analyst Giacomo Romeo said.
Brent crude, the international benchmark, has risen 6 percent and U.S. equivalent WTI nearly 8 percent since the latest cuts were first announced in late November.
But despite tensions in the Middle East, including the Israel-Hamas war and Houthi attacks on merchant shipping, oil prices remain below $100 a barrel, levels last seen in the summer of 2022.
Ahead of the announcement, traders were highly anticipating a decision to extend sanctions, with crude oil prices rallying last week. Brent rose more than 2 percent last week to close above $83 a barrel on Friday, while WTI closed below $80 a barrel, up more than 4 percent.
Amrita Sen at Energy Aspects said Opec+ was “trying to balance the market”. “Oil prices are very stable . . . but they want to make sure that stability continues,” he said.
Saudi Arabia, which has cut its production by 1 million b/d since July, has accepted most of the curbs. Overall, the kingdom is producing 2 million b/da 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 oil prices close to $100 a barrel to finance Crown Prince Mohammed bin Salman's ambitious economic reform plan, but efforts to cut its output have not been welcomed by the United States, which worries about the effects on inflation.
Kuwait, Algeria, Kazakhstan, Oman, Iraq and the United Arab Emirates also pledged to continue production cuts.
All eyes are now on the semi-annual meeting of OPEC+ ministers on June 1, where analysts expect the group to adjust production policy for the second half of the year.
Member states “hope to add barrels to the market again” in the second half of the year, Chen said. “But that is not a guarantee. It depends on the market condition. They will never add barrels again to create a surplus in the market,” he added.
The outlook for oil demand this year remains unclear. The IEA predicts oil demand will grow at half the pace of 2023 to 1.2 million b/d, while OPEC believes demand growth will be around 2.2 million b/d.
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