OPEC+ oil producers have agreed to output cuts approaching two million barrels per day (bpd) for early next year. This agreement is led by Saudi Arabia, which is rolling over its current voluntary cut.
Saudi Arabia, Russia, and other OPEC+ members, who collectively produce over 40 percent of the world's oil, held a virtual meeting to discuss 2024 output amid concerns about a potential surplus. Currently, their combined output is approximately 43 million bpd, with existing cuts of about five million bpd aimed at supporting oil prices and stabilizing the market.
The latest agreement involves cuts nearing two million bpd, with Saudi Arabia extending its voluntary cut of one million bpd, which has been in place since July, per sources in the cartel. Russia is announced to reduce its output by 500,000 bpd.
The market reacted to this news, with benchmark Brent crude futures increasing by 1.2 percent to above $84 a barrel, driven by expectations of fresh cuts from OPEC+. Analysts suggest that Saudi Arabia and Russia might roll over their cuts through the first quarter of 2024 and seek voluntary adjustments from individual producers.
The agreement focuses on reducing output due to falling prices, weaker economic growth in 2024, and concerns about a supply surplus. The International Energy Agency (IEA) has forecast a slowdown in demand growth in 2024 due to various factors, including energy efficiency gains and the growth of electric vehicles. The OPEC+ meeting faced delays due to disagreements over output quotas for African producers.
In a surprising development, Brazil announced its intention to join the cooperation charter of the OPEC+ oil alliance, effective from January 2024, Brazilian Energy Minister Alexandre Silveira announced at a meeting of the group on Thursday.