OPEC+ postpones oil output hikes, prolongs cuts into 2026
Updated 12/5/24 to correct timeline in first sentence.
OPEC+ will delay the start of oil output increases by another 3 months—pushing the timeline to April 2025—while also extending the full unwinding of production cuts by a year to the end of 2026.
The UAE also has agreed to postpone an increase of 300,000 b/d to its quota until April.
The decisions, announced Dec. 5, were driven by weak global demand and surging production from non-OPEC+ countries.
OPEC+, which consists of the Organization of the Petroleum Exporting Countries (OPEC) and allies such as Russia, initially planned to begin unwinding 2.2 million b/d of voluntary cuts in October 2024. However, the slowdown in demand and growing output from other producers have repeatedly forced the group to postpone the plans.
Despite controlling roughly half of the world’s oil supply, the group's production cuts have struggled to lift prices significantly.
Global benchmark Brent crude has largely traded within $70-80/bbl throughout the year, hitting a 2024 low of under $69 in September.
The market is not yet ready for a production increase, said Richard Bronze, head of geopolitics at Energy Aspects, a London-based research firm. He said the OPEC+ decision also reflects uncertainty about the effects of a Donald Trump presidency on oil markets. For one, President-elect Trump may pursue stricter policies on Iran, potentially reducing Iranian oil exports and creating opportunities for other producers to fill the gap.
2025 crude oil balances
The shift to 18 months from 12 months for the cut phase-out is constructive for crude balances for 2025, according to Rystad Energy.
“The overall impact on supply growth in 2025 is now reduced by 1.03 million b/d, and the crude and liquids balances surplus are reduced by the same amount, respectively. In 2025, crude and condensate were oversupplied by 700,000 b/d, now short 335,000 b/d. The liquids balance was oversupplied 1.25 million b/d, now oversupplied 215,000 b/d (same swing of 1.03 million b/d),” said Mukesh Sahdev, Global Head of Commodity Markets, Rystad Energy.
The delayed phase-out also signals that OPEC+ acknowledges the weakness in Chinese oil demand and is not anticipating a surprise rebound anytime soon given President-elect Trump’s possible tariffs against China, but the overall signal to the market is constructive and will likely prevent any price downsides in the short term, Sahdev continued.
Seasonal factors might also play a role in the delay. January typically sees lower demand due to refinery maintenance, which reduces the need for crude oil. Combined with anticipated increases in output from countries such as the US, Guyana, and Brazil, OPEC+ faces significant pressure as it attempts to manage supply and maintain price stability.
