The Organization of the Petroleum Exporting Countries and its allies — a group of leading oil producers known as OPEC+ — agreed Sunday to extend a voluntary production cut of 2.2 million barrels of crude oil a day into 2025.
The cuts, first agreed in December, were due to expire at the end of this month. They came on top of previously agreed reductions of 3.66 million barrels per day announced in 2022 and 2023 as the group — led by Saudi Arabia and Russia — tried to counter slowing demand and rising output from the United States.
The group also released its 2025 production requirements for member and nonmember countries, which were essentially the same as this year’s. The United Arab Emirates’ production quota increased by 300,000 barrels per day. The uptick “will be phased in gradually” from January through September 2025, the group said.
Despite the OPEC+ cuts, equivalent to about 5.7% of global crude supply, and ongoing tensions in the Middle East, global oil prices have fallen by about 10% since hitting a five-month high in early April.
The price of Brent crude, the global oil benchmark, traded at $82 a barrel on Friday, down from $91 in early April when a suspected Israeli airstrike on Iran’s embassy in Syria sent jitters through oil markets.
The price of West Texas Intermediate crude, the US benchmark, has dropped from nearly $87 per barrel to $78.
Saudi Arabia needs Brent crude to trade at around $81 a barrel in order to balance its budget, according to the International Monetary Fund.
Subdued prices have partly been the result of record US oil output, which has bumped up global supply, and concerns about sluggish demand in China — the world’s biggest importer of oil — and other major economies.
In its most recent monthly report, the International Energy Agency cut its forecast for the growth in global oil demand this year by 140,000 barrels per day to 1.1 million barrels per day, citing weak demand in developed economies, particularly in Europe.
Despite the weaker growth forecast, a supply crunch could develop. The IEA expects global supply to increase by just 580,000 barrels per day this year. In March, the Paris-based agency said it expected there to be a deficit in supply in 2024 if OPEC+ extended its output cuts through the rest of the year.
Sunday’s OPEC+ decision coincides with Saudi Arabia selling some more shares in its oil company Aramco. The government is selling less than 1% of the Riyadh-listed company in a deal that could raise $13 billion for economic diversification projects.
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