Opec+ has extended a set of formal and "voluntary" crude production cuts into 2025.
The group has decided to keep its formal crude production targets until the end of next year, the Opec secretariat said today following a series of ministerial meetings. This includes what was a 2mn b/d cut to official output quotas agreed in October 2022.
Two sets of "voluntary" cuts by some members of the group — separate from formal production policy — have also been extended. The first, which amounts to 1.66mn b/d, was originally agreed in the first half of 2023 and had been set to run until the end of 2024. It will now be in place until the end of 2025.
The second collection of voluntary cuts, which amount to 2.2mn b/d, was announced between June and November last year and had been due to run until the end of this month. These will now be prolonged for another three months until the end of September after which they will be phased out in stages over a 12-month period.
The voluntary cuts are only being implemented by some members of Opec+ and fall outside of the group's formal production quotas. They were designed to allow for flexibility and to maintain cohesiveness among the alliance given that some members were already producing well below their official quotas.
Today's meetings also resulted in the UAE securing another upgrade to its official production quota, this time by 300,000 b/d. It comes after a previous upwards adjustment of 200,000 b/d came into effect from January 2024. The UAE's new official quota will be gradually phased in starting in January and stand at 3.519mn b/d by September 2025.
Another key headline from the Opec+ meetings relates to each individual member's official crude production capacity, from which output quotas are typically calculated. The alliance extended the assessment period allotted to three "independent sources" carrying out capacity evaluations to November 2025 and said new capacities would not come into effect until 2026 — one year behind schedule.
The latest agreements appear designed to hand the group flexibility given an array of uncertainties related to supply-demand balances and the macroeconomic outlook. The uncertainty, coupled with geopolitical tensions, has contributed to erratic movement in oil prices over the past couple of months. Ice Brent futures breached the $90/bl mark in early April, up more than 10pc on the month, only to shed most of those gains in the weeks that followed. The front-month Ice Brent contract has been oscillating between $82/bl and $84/bl since the middle of May.
