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Anonymous sources within OPEC revealed on Sunday that certain OPEC members and allies, spearheaded by Russia, have reached an agreement to prolong voluntary oil output reductions from the first quarter into the second quarter of 2024.
These cuts, initially totaling approximately 2.2 million barrels per day (bpd), were endorsed by OPEC+ in November, with Saudi Arabia leading by example by extending its own voluntary reduction. OPEC+ has been implementing successive output reductions since late 2022 to stabilize the market amidst heightened production from non-member producers like the United States, coupled with concerns regarding demand due to elevated interest rates in major economies.
Oil analysts, for the most part, had expected the extension. While some pundits argued that some OPEC+ members would seek to increase supply with Brent prices above $80, it appears that OPEC+ remains cautious about bringing back additional supply amid ongoing uncertainty surrounding demand in China. Looking ahead, the next OPEC meeting in June will provide insight into how OPEC perceives demand growth in Asia developing in late 2024 and 2025. Thus far, the group of producers has managed to align its interests, but maintaining this unity may become more challenging if the anticipated surge in demand materializes later this year.
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