OPEC+ Maintains Steady Oil Production Strategy
OPEC+ decided to retain its current oil production policy, emphasizing a gradual rollback of production cuts starting in October, amidst varying market conditions.
Published August 02, 2024 - 00:08am
The latest meeting of ministers from OPEC+ countries retained their current oil production policy, including the planned gradual rollback of production cuts beginning in October. This signifies the group's cautious approach to market uncertainties, as they confirmed that the decision to increase production could be temporarily suspended or reversed if necessary.
The Joint Ministerial Monitoring Committee (JMMC) of the Organization of the Petroleum Exporting Countries and its allies, led by Russia, conducted the meeting online. According to the current production plan agreed upon in June, OPEC+ aims to gradually eliminate cuts amounting to 2.2 million barrels per day over a year, from October 2024 to September 2025.
OPEC+ reiterated that members agreed that the gradual elimination of voluntary production cuts could be postponed or reversed depending on market conditions. Oil prices have dropped from more than $92 per barrel in April to under $82 due to concerns over demand strength. However, prices received some support this week from rising tensions in the Middle East.
Overall, OPEC+ is reducing its production by 5.86 million barrels per day, which constitutes around 5.7% of global demand. This reduction is part of a series of steps agreed upon since late 2022. Notably, in their last meeting in June, the coalition extended a reduction of 3.66 million barrels per day until the end of 2025 and prolonged the latest cuts, which include a 2.2 million barrel per day reduction by eight members, for three more months until the end of September 2024.
The statement from OPEC+ also highlighted that Iraq, Kazakhstan, and Russia confirmed full compliance with the agreed production cuts. Earlier, these three countries had presented plans to compensate for any excess production.
A source within OPEC+ mentioned that the meeting's chairman emphasized the importance of members showing their commitment to the compensation plan. The JMMC, which includes oil ministers from Saudi Arabia, Russia, and other major producers, usually meets bi-monthly and can propose recommendations to the broader OPEC+ group.
The next JMMC meeting is scheduled for October 2nd. As part of their ongoing evaluation, the ministers of major OPEC+ member countries will meet again to determine whether to adjust their strategy in line with the evolving market conditions.
With oil prices impacted by fluctuations in demand outlook and geopolitical tensions, OPEC+ continues to navigate these turbulent waters with a strategy aimed at sustaining market stability. Meanwhile, members are closely monitoring market dynamics to adapt their policies accordingly, ensuring they align with global demand and supply conditions.