OPEC+ Once Again Moves to Cut Production
The global oil cartel announced it would be extending its ongoing production cuts through the first few months of next year.
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OPEC+ is hoping for life by a thousand cuts.
On Thursday, the global oil cartel announced it would be extending its ongoing production cuts through the first few months of next year in a bid to support prices.
Oil Spill
The Saudi Arabia and Russia-led pact spent 2024 extending and extending its production cuts, even as the ongoing production slowdown began to fracture group unity and arguably ate into its global market share.
But even with the cuts, Brent Crude oil futures have slipped around 17% since a July peak. The only solution, the thinking seems to go, is to double down on the production slowdown to kneecap any risk of oversupply. On Thursday, the group agreed to do just that:
- OPEC+ had previously agreed to increase its production to 300,000 barrels per day starting in January, but now it won’t lift its quotas until April. The ramp-up to fully reintroduce those 300,000 barrels per day won’t be complete until the end of 2026, a full year later than originally planned.
- That means the group will pump 800,000 fewer barrels per day than expected through 2025 if everyone holds to the quotas, analysts told the Financial Times.
“It takes a huge amount of oil out of the 2025 plan,” Paul Horsnell, head of commodities at Standard Chartered, told the FT. “It has been shunted back. Two-thirds of the oil they were expected to bring on [in 2025] is now expected in 2026.”
Divergence: Meanwhile, in the US, the oil industry is experiencing a rare decoupling. The Trump 2.0 administration seems to be angling for deregulation of the industry, while also expressing a desire to keep prices down. It’s all led to the rare occurrence of energy stocks rising while US-focused West Texas Intermediate crude prices fall. Interesting times, to say the least.
