Commodities
Explainer-What OPEC+ oil output cuts are currently in place?
By Alex Lawler and Yousef Saba
LONDON (Reuters) – OPEC+ oil producers are scheduled to meet on June 2 to decide their next output policy steps, including whether to extend voluntary production cuts totalling about 2.2 million barrels per day (bpd), which expire in the first half of 2024.
These voluntary cuts from the Organization of the Petroleum Exporting Countries and allies, known as OPEC+, come on top of earlier reductions of 3.66 million bpd that were announced in various steps since late 2022 and which are valid until the end of 2024.
Total pledged cuts therefore currently amount to 5.86 million bpd, equal to about 5.7% of daily world demand, according to Reuters calculations.
WHAT ARE THE MOST RECENT CUTS?
The latest 2.2 million bpd round of voluntary cuts was announced by the individual countries on Nov. 30 2023.
Initially in place for the first quarter of 2024, the countries in March extended them until the end of June and Russia slightly adjusted how its cut would be implemented.
Included in the 2.2 million bpd is an extension of existing Saudi and Russian voluntary cuts from 2023 of 1.3 million bpd, meaning the newest element of the cut is about 900,000 bpd.
WHAT WERE THE EARLIER CUTS?
Before November 2023, OPEC+ was making production cuts of about 5 million bpd, comprising 1.3 million bpd of Saudi and Russian voluntary cuts put in place earlier in 2023, and 3.66 million bpd agreed in previous steps.
Of the 3.66 million bpd, 2 million bpd was agreed by OPEC+ in late 2022 and several members agreed voluntary cuts of 1.66 million bpd in April 2023.
OPEC+ when it met in June 2023 extended the 3.66 million bpd of cuts until the end of 2024.
HOW DO THE OUTPUT CUTS AFFECT TARGETS?
The following table shows OPEC+ pledged cuts and production targets for the first half of 2024 in millions of barrels per day, based on information from OPEC, individual nations and Reuters calculations.
Totals are rounded.
Actual output
Country H1 2024 Implied H1 Productio (April 2024)*
voluntary 2024 n target
cuts pledged targets after H1
2024
0.91
Algeria 0.051 0.908 0.959
Congo
0.000 0.277 0.277 0.26
0.05
Equatorial Guinea 0.000 0.070 0.070
Gabon 0.21
0.000 0.169 0.169
Iraq 4.24
0.220 4.009 4.22
Kuwait 2.49
0.135 2.413 2.548
Nigeria 0.000 1.500 1.500 1.28
Saudi 9.03
Arabia 1.000 8.978 9.978
UAE 3.15
0.163 2.912 3.075
0.48
Azerbaijan 0.000 0.551 0.551
1.59
Kazakhstan 0.082 1.468 1.55
Mexico 1.6
0.000 1.753 1.753
Oman 0.76
0.042 0.759 0.801
9.3
Russia** 0.500 8.949 9.449
0 0.73
Bahrain*** 0.196 0.196
Brunei 0
0.083 0.083
0
Malaysia 0.401 0.401
South 0
Sudan 0.124 0.124
Sudan 0
0.064 0.064
Total 21.62
OPEC-9 1.569 21.236 22.796
Total 14.46
Non-OPEC 0.624 14.348 14.972
Total
OPEC+ 2.2 35.60 37.80 36.08
* International Energy Agency figures excluding OPEC members Iran, Libya and Venezuela which are exempt from making cuts
** Russia initially promised to deepen cuts to 500,000 bpd of oil and oil product exports in the first quarter 2024. In March, Russia said it would cut 471,000 bpd from production and exports in April – June. The table is calculated using the initial figure
*** Figure is total for Bahrain, Brunei, Malaysia, Sudan and South Sudan
Investing.com — Oil prices settled lower Friday, ending the week with a loss as weaker U.S. nonfarm payrolls stoked concerns about an economic-led slowdown in crude demand.
At 2:30 p.m. ET (1430 GMT), the futures (WTI) traded fell 2.1% to settle at $67.67 a barrel, while contract fell 2.2% to $71.06 per barrel.
U.S. economic slowdown worries resurface after weak jobs report
The US economy added fewer jobs than anticipated in August, but rose from a sharply revised July figure, according to Labor Department data that could factor into the Federal Reserve’s next policy decisions.
Nonfarm payrolls came in at 142,000 last month, up from a downwardly-revised mark of 89,000 in July. Economists had called for a reading of 164,000, up from the initial July mark of 114,000.
Following the release, bets that the Fed will introduce a deeper 50 basis-point rate cut — rather than a shallower 25 basis-point reduction — increased.
Concerns about the demand come just a day after OPEC+ said it had agreed to postpone a planned increase in oil production for October and November.
U.S., Europe working on Iran sanctions
Geopolitical tensions ratcheted up on Friday after the U.S. and Europe they were working on sanctions to impose on Iran after the Tehran sent missiles to Russia.
The U.S. had previously warned Iran about transferring missiles to Russia, saying it would represent a major escalation in Iran’s support of Russia’s war against Ukraine.
(Reuters) – Goldman Sachs adjusted its expectations for OPEC+ oil production saying it now expects three months of production increases starting from December instead of October, the bank said in a note on Friday.
OPEC+ has agreed to delay a planned oil output increase for October and November, the producers group said on Thursday after crude prices hit their lowest in nine months, adding it could further pause or reverse the hikes if needed.
However Goldman Sachs maintained its range of $70-85 per barrel and a December 2025 Brent forecast at $74 per barrel.
The investment bank expects the effects of a modest reduction in OPEC+ supply in the upcoming months to be counterbalanced by easing effects from the current softness in China’s demand and faster-than-expected recovery of Libya’s supply.
“We still see the risks to our $70-85 range as skewed to the downside given high spare capacity, and downside risks to demand from weakness in China and potential trade tensions,” Goldman Sachs said.
Brent crude futures were down $1.63, or 2.24%, to $71.06 a barrel on Friday, their lowest level since December 2021. U.S. West Texas Intermediate crude futures fell $1.48 on Friday, or 2.14%, to $67.67, their lowest since June 2023. [O/R]
Investing.com — Strategists at Citi Research said oil prices could decline to around $60 per barrel by 2025, citing a significant market surplus as the primary driver.
While recent supply disruptions in Libya and a delayed production cut unwinding by OPEC+ have offered short-term support for Brent prices in the $70-72 range, Citi views this as temporary.
“At the time of writing, markets have not reacted to the OPEC+ decision, with Brent around flat to the 4 September close. Still, the Libyan situation could take months rather than a week to resolve, strategists wrote.
They highlight the likelihood of a strong market surplus emerging next year, pushing prices lower.
“We recommend selling on a bounce toward ~$80 Brent, as we look ahead to moves down to the $60 range in 2025 as a sizeable market surplus emerges,” the note states.
OPEC+ has delayed the start of its planned production cut unwind from October 2024 to December 2024, with the process now set to conclude by the end of 2025. This decision comes in response to recent market weakness and price declines, despite ongoing disruptions to Libyan oil supplies and broader economic concerns in the U.S. and China.
Separately, Bank of America’s Commodities Research team has revised down its price forecast to $75 per barrel for the second half of 2024, down from nearly $90, and for 2025, reduced from $80.
The team cites concerns about growing global oil inventories despite assuming OPEC+ will delay planned production increases. They note that weaker demand growth, combined with record OPEC+ spare capacity exceeding 5 million barrels per day, has dimmed the outlook for oil prices.
“In effect, we now see Brent oil prices moving from the top toward the middle of our unchanged $60-80/bbl medium-term range faster than previously warned,” BofA strategists said. This surplus in capacity, along with slower demand, also reduces the risk of price spikes from potential geopolitical disruptions.
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