OPEC+ delays production hike by three months
Brent's price remained steady after OPEC+ delayed its planned output hike by another three months until the end of March 2025.
PHOTO: OPEC's logo. Getty Images
The Organization of the Petroleum Exporting Countries (OPEC) said that in addition to a further delay in unwinding supply cuts, OPEC+ members will bring this supply back at a slower pace. The unwinding of the voluntary production cut will take place on a monthly basis until the end of September 2026.
The Saudi Arabia-led coalition was previously expected to start unwinding the ongoing 2.2 million b/d cut in January 2025, with a gradual production increase of 180,000 b/d.
According to market analysts, OPEC+ has delayed plans to bring some supply back online due to weaker-than-expected demand growth and softer oil prices.
“Previously, the group were set to bring 2.2m b/d [2.2 million b/d] of supply back online over the course of 12 months,” two analysts from ING Bank said. “However, members will now bring this supply back over the course of 18 months,” they added.
How will this affect the oil balance in 2025?
Oil market traders are growing concerned about lacklustre oil demand, mainly from China, and likely increase in non-OPEC oil production in 2025, which may potentially lead to an oversupplied global oil market.
“The [supply cut] extension and the slower return of barrels is not enough to push the market into deficit next year. The move still leaves the market in surplus in 1H25 [first half of 2025],” ING Bank’s analysts said.
However, the decision to extend production cuts into 2025 signals that OPEC+ believes demand growth might not be robust enough to accommodate the full return of supply anticipated in 2025.
“While the action taken by OPEC+ may potentially provide a higher floor to the market than previously expected, ultimately the group will still have to accept lower prices,” ING Bank’s analysts added.
By Aparupa Mazumder
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