Oil market set to tighten as OPEC+ sticks with production cuts

The OPEC+ group is set to continue with its production cuts until at least the end of the first half of 2024 as the alliance’s Joint Ministerial Monitoring Committee (JMMC) did not recommend any changes to output policy at its meeting on April 3.

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The JMMC is the OPEC+ panel that monitors the situation in the oil market and assesses compliance with the cuts. It doesn’t take decisions on policy as it just recommends possible actions to the full OPEC+ ministerial meetings.

After a short regular meeting today, the panel did not recommend to the OPEC+ ministers any change to the current levels of production, as widely expected.

The panel’s next meeting is scheduled to be held on June 1, ahead of a planned full OPEC and OPEC+ ministerial meetings, which are expected to decide whether to proceed with the current level of cuts beyond June or reverse some of the reductions.

After the meeting today, Ole Hansen, Head of Commodity Strategy at Saxo Bank, commented,

“Brent crude oil toys with $90 after OPEC+ decided to stick with oil supply cuts for the first half of the year, keeping global markets tight and potentially sending prices higher.”

Brent Crude was up by 0.73% at $89.61 early on Wednesday ahead of the weekly EIA inventory report.

In early March, the members of the OPEC+ alliance that had pledged the Q1 cuts announced they would roll over the supply reductions until the end of the second quarter.

Saudi Arabia, Iraq, the United Arab Emirates (UAE), Kuwait, Kazakhstan, Algeria, Oman, and Russia are now cutting their respective crude oil production and exports in the first half of 2024 with extra voluntary reductions, on top of the voluntary cuts OPEC+ previously announced in April 2023 and later extended until the end of 2024.

Russia will be cutting oil production instead of exports in the second quarter of 2024 so that all OPEC+ producers that reduce output contribute equally to the cuts, Russian Deputy Prime Minister Alexander Novak said last week.