According to the chairman of the coalition, the Saudi Minister of Energy Abdulaziz bin Salman, the “precautionary” decision of OPEC + to postpone the increase in crude production until after the first quarter of the group's time to submit to improvements in to assess global demand, European growth and the US economy.
On Thursday, the oil producers' federation agreed the extension of several product cutswith the timeline to begin gradually unwinding a voluntary 2.2-million-barrels-per-day cut undertaken by a subset of OPEC+ members pushed back three months to April.
A number of group members are delivering a second voluntary production cut, while the consortium as a whole is also limiting production under its formal policy – both now set to stretch until December 31 , 2026, rather than the penciled end of 2025.
Speaking to CNBC's Dan Murphy on Friday, the Saudi energy minister said OPEC+ needed to do a “reality check” and reconcile supply demand signals with market sentiment and attend to “the fundamentals, but put something together that will reduce the sentiments.” negative that within, of. Indeed, the contours of what OPEC+ can do.”
Barclays analysts partly echoed the minister's sentiments, saying the federation was “maintaining a cautious stance” and suggesting that “concerns about market share among members appear to be exaggerated.”
Saudi Minister of Energy Abdulaziz bin Salman on October 5, 2022.
Bloomberg | Bloomberg | Getty Images
OPEC+ is facing a series of variables that will affect the supply-demand picture and geopolitical uncertainty, from economic growth amid low inflation to conflict in the oil-rich Middle East region and the return of the White House in January with the -elect Donald Trump – a long time. the champion of the US oil industry, who imposed protectionist tariffs on China and sanctioned Iran's nuclear program during his first presidential term.
“There are so many other things, you know, growth in China, what's happening in Europe, growth in Europe… what's happening in the US economy, like interest rate, inflation,” said minister Saudi power on Friday.
“But honestly, fundamentals (supply demand) are the main reason to move, or move, to bring in these votes. It's not a good idea to bring in numbers in the first quarter. “
The first quarter usually sees an increase in inventories due to lower demand for transportation fuel.
OPEC+ member compliance
In a note on Friday, analysts at HSBC assessed that Thursday's OPEC+ agreement is “slightly supportive” for the supply-demand balance, reducing the market surplus in 2025 to just 0.2 million barrels per day, if the alliance of the Oil producers continue to hike production. in April.
“Another delay, we would not rule out, would leave the market largely in balance next year,” they said. “While OPEC+'s decision to hold off strengthens fundamentals in the short term, it could be seen as an admission that demand is sluggish.”
Demand has been at the forefront of OPEC+ deliberations, with OPEC's November Monthly Oil Market Report seeing 1.54 million barrels per day of year-on-year growth in 2025.
The Paris-based International Energy Agency, meanwhile, forecast last month that global oil demand would expand by 920,000 barrels per day this year and just under 1 million barrels per day in 2025.
Market concerns have risen particularly over the outlook for the world's biggest crude importer, China, whose recovering economy has received a government boost in recent months through stimulus measures.
Abdulaziz bin Salman said that OPEC+ had “not necessarily” lost confidence in global appetite or in China's recovery, but admitted that “what was not helpful was that some countries (OPEC +) keep their promises properly. “
OPEC+ has more and more crack on the compliance of the members with individual quotas – which have included the likes of Iraq, Kazakhstan and Russia in the past – and which require overproducers to make up excess barrels with additional cuts. The deadline for these compensations is now the end of June 2026.
Oil prices have retreated despite the three-pronged extension of production increases, with the Ice Brent contract for February settlement trading at $71.40 a barrel at 2:46pm London time, down 0.96% from Thursday's close . Nymex WTI January futures fell to $67.63 per barrel, down 0.98% from the previous day's settlement price.
“While prices are likely to remain volatile in the short term, we expect falling inventories this year and a fairly balanced market next year, compared to market expectations for an oversold market of supply, to support prices over the coming months,” said UBS Strategy Giovanni. Staunovo said in a note on Friday.
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