OPEC plus is an oil-producer group comprising member countries of the Organization of the Petroleum Exporting Countries (OPEC) and their allies.
And on Sunday night, its Secretariat “noted the announcements” of several OPEC-plus countries extending additional voluntary cuts totaling 2.2 million barrels per day for the second quarter of 2024.
The reductions are taken from the quotas adopted at the OPEC plus ministerial meeting in June 2023.
According to OPEC, they are in addition to the voluntary output cuts announced by OPEC plus countries in April last year and later extended until the end of 2024.
In November 2023 Saudi Arabia, Russia and several other OPEC plus countries announced voluntary production cuts totaling about 2.2 million barrels per day for the first quarter of 2024.
Saudi Arabia’s Ministry of Energy said the country, which is also the de facto leader of OPEC, would extend its voluntary production cut of 1 million bpd through the end of June.
The country’s oil production will be approximately 9 million barrels per day until the end of the second quarter.
Russia, a leading OPEC ally, also announced voluntary cuts of 471,000 barrels per day from its crude production and exports for the second quarter—this is slightly lower than its cuts of 500,000 barrels per day in the first quarter.
Other OPEC plus countries have also made statements.
Iraq said it is planning to extend its daily production cut by 220,000 barrels, the UAE, on the other hand, would extend 163,000 barrels, while Kuwait would extend by 135,000 barrels into the second quarter.
Despite ongoing tensions in the Middle East, including the Palestine-Israel Conflict and the attacks by Houthi rebels disrupting Red Sea shipping, oil prices remained around 80 U.S. dollars per barrel this year.
This is well below the 100 U.S. dollars per barrel threshold reached in the summer of 2022.
Adequate oil supply has contributed to this stability.
Credit rating agency Fitch Ratings pointed out that Saudi Arabia, due to its significant investments in economic transformation policies, including those for the development of futuristic cities and sports events, would require oil prices to surpass 90 U.S. dollars per barrel to support these plans.
Meanwhile, analysis from the Bank of America said that the risks that could drive oil prices higher include increased production costs, a slowdown in electric vehicle sales, and the continued unity and compliance of OPEC plus in their production cuts.
On the other hand, the downside risks include a global economic slowdown leading to a decrease in oil demand and improved efficiency in shale oil production adding to the supply.
Also, the failure of OPEC plus members to adhere to production cut agreements would also result in oversupply and price declines.
Looking at the long-term perspective over the next five years, Bank of America predicts that oil prices will hover around 60 to 80 U.S. dollars per barrel by 2029 due to the expected increase in production and the global energy transition trend.
The statement noted that the voluntary cuts “will be returned gradually subject to market conditions” to support market stability after June.
“To support market stability, these additional cut volumes will be returned gradually, subject to market conditions,” according to Ministry of Energy, Saudi Arabia.
OPEC plus countries are set to convene a ministerial meeting in June to discuss production targets, which may set the tone for their movement in the second half of this year.
Analysts predict that OPEC plus may adjust its production policies during the second half of the year.
