Key Points
- OPEC+ delays planned output increase by three months.
- The group extends production cuts until the end of 2026.
- The UAE will gradually increase its output from 2025.
OPEC+ delays output increases and extends cuts to support oil prices and the market amid weak demand and rising production outside the group.
OPEC+ delays output rise due to weak demand and excess supply
Due to sluggish demand and rising output from non-member nations, OPEC+ on Thursday prolonged the full unwinding of production restrictions until the end of 2026 and postponed the commencement of oil output rises by three months until April.
Initially, the cartel, which owns roughly half of the world’s oil supply, intended to start reversing the cuts in October 2024. However, several postponements resulted from a slowdown in global demand and a surge in supply from non-member nations. The Organisation of the Petroleum Exporting Countries (OPEC) and its allies, including Russia, are a part of OPEC+.
According to Bjarne Schieldrop, chief commodities analyst at SEB, “they have been talking about this (output hike) since June, but they are still delaying.” “This means there is no upside to the oil price in the next couple of years.” The acts of U.S. President-elect Donald Trump, who has promised to end the war in Ukraine and may put fresh sanctions on Iran and China, will now be the main focus of the oil market, Schieldrop noted.
Extended production cuts to support oil prices until 2026
The OPEC+ decision, according to Amrita Sen of Energy Aspects, is optimistic because it eliminates the majority of the excess supply for the upcoming year. Nevertheless, she pointed out that despite the OPEC+ announcement, market sentiment may remain negative since it assumes Trump wants low oil prices.
According to Oil price, Trump regularly blamed high oil prices on OPEC+ during his last administration and pushed Saudi Arabia to increase oil production in return for U.S. backing against Iran.
As a result of a series of curbs implemented since 2022 to stabilise the market, OPEC+ countries are currently holding back 5.86 million barrels per day (bpd), or roughly 5.7% of world demand.
On Thursday, OPEC+ decided to prolong the 1.65 million bpd and 2 million bpd cuts by one year, till the end of 2026. Additionally, the group decided to begin reducing the 2.2 million barrels per day cut in April 2025, with increments of 138,000 barrels per month for 18 months, until September 2026.
Furthermore, rather than beginning in January 2025 as originally intended, OPEC+ agreed to permit the United Arab Emirates to increase output by 300,000 barrels per day throughout the period of April 2025 to September 2026.
