The Organization of the Petroleum Exporting Countries and its allies on Thursday extended the voluntary crude oil production cuts of 2.2 million barrels per day till the end of March due to poor demand.
The cartel held a ministerial-level meeting with its allies on Thursday via videoconference.
OPEC in an official release also said it will extend overall production cuts other than the 2.2 million barrels per day of voluntary reductions till December 31, 2026.
The voluntary cuts of 2.2 million barrels by eight members, including Saudi Arabia and Russia, were set to expire on December 31 of this year.
The cartel has extended these cuts since June, when it was originally set for expiration.
At the time of writing, the price of West Texas Intermediate crude oil was at $68.30 per barrel, down 0.3% from the previous close. Brent crude was down 0.2% at $72.14 per barrel.
Steep production cuts
OPEC and its allies have been withholding around 5.86 million barrels per day of crude oil from the market in a series of cuts since 2022. This translates to about 5.7% of global oil supply.
Total production cuts include 2 million barrels per day of reductions by the whole group and 1.65 million barrels per day by eight members of the OPEC+ alliance. On top of these, another 2.2 million barrels per day of voluntary cuts by the same eight members had been in place since the start of 2024.
The gradual unwinding of 2.2 million barrels per day of voluntary output cuts will begin from April and will run through September 2026, OPEC said in the release.
The first two cuts of 2 million barrels per day and 1.65 million barrels per day were extended by a year till the end of 2026.
Source: OPEC
OPEC was initially scheduled to raise output by 180,000 million barrels per day by unwind some of the 2.2 million barrels per day of reductions from December.
Meanwhile, the cartel said production quota for the United Arab Emirates have been increased by 300,000 barrels per day. UAE had raised its production capacity and was set to increase output from 2025.
The production increase for UAE will be gradually phased in from April next year through September 2026.
Oversupply concerns
Thursday’s decision by OPEC+ was largely in line with market expectations.
Analysts with Commerzbank AG had earlier said that the cartel may extend production cuts by three months till the end of March as oversupply concerns weighed on oil prices.
Oil prices have struggled to break out of a narrow range for most of the year despite steep production cuts by OPEC. Brent crude oil prices have stayed in a narrow bandwidth of $70-$80 for most of 2024.
Most countries within the OPEC+ group want oil prices above $80 per barrel, which is the breakeven price for them.
Poor demand from top importer China, and rising production in non-OPEC countries, particularly the US, had increased concerns about a glut in 2025.
Still, the International Energy Agency expects the market to be flooded with excess crude oil even without production increases by OPEC in 2025.
IEA said earlier that supply from non-OPEC countries, led by the US, is likely to rise by 1.5 million barrels per day next year. It expects overall global demand to grow below 1 million barrels per day next year.
In the absence of a production increase for at least the next three months, the focus will now shift to US President-elect Donald Trump’s policies for the oil and gas sector.
Trump had been vocal about his support for boosting oil and gas production in the US, and is also likely to roll back several climate regulations in the US.
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