Opec+ extends output cut into 2025 but ups UAE quota

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Opec+ has agreed to extend its existing crude output cuts into 2025 in a bid to shore up crude prices which are under pressure from surging North American supply.

Opec said in a statement on Sunday that it was extending voluntary cuts of 1.65 million barrels per day (bpd) for all members, announced in April 2023, until the end of December 2025.

Oil prices rose slightly on Monday in response. Brent was selling at $81.31 a barrel after a slight decline in early morning trade. The IMF puts the breakeven price for Saudi Arabia, the world’s largest exporter, at around $96 a barrel as it must finance a series of huge infrastructure and development projects.

Saudi Arabia, the UAE, Russia, Iraq, Kuwait, Kazakhstan, Algeria and Oman met in Riyadh on Sunday to reinforce the precautionary measures to support the stability and balance of the oil markets.

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The eight countries agreed to extend their additional voluntary cuts of 2.2 million bpd, announced in November 2023, until the end of September 2024. These cuts may then be gradually phased out on a monthly basis until the end of September 2025 to support market demand.

Norbert Rücker, head of economics at Julius Baer, said in a note that Sunday’s decision “simply acknowledges that the petro-nations have grown wary of losing market share”.

Opec+, comprising Opec and allies such as Russia, has lowered output by 5.86 million bpd.

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Vandana Hari, CEO of Vandana Insights in Singapore, said that the decision to unwind cuts gradually from the end of September was “slightly bearish” for the market. But she said that the arrangement would ease strains between those who had agreed to cut voluntarily and those who were aiming for higher quotas. 

“It should go some way in ensuring continued cohesion and harmony within the group,” she said.

The UAE was a notable winner from Sunday’s meeting. It saw its production quota increased by 300,000 bpd, which will be phased gradually from January 2025 until the end of September 2025.

Opec said in May that it expects strong oil demand growth this year and next as the world economy remains resilient.

“The global oil demand growth forecast shows a further robust expansion of 1.8 million bpd year-on-year, averaging 106.3 million bpd in 2025,” said Haitham Al Ghais, the secretary general of Opec.