According to the vice president of research at S&P Global, OPEC+ has decided to extend production cuts until the end of 2024.
The alliance then plans to start adding supply to the market in 2025.
Weak oil demand, particularly in China, and concerns about slowing economies contributed to the market’s bearish sentiment.
The OPEC+ group will begin adding supply to the market in 2025, for the first time since 2022, Jim Burkhard, vice president of research at S&P Global Commodity Insights, said at the Asia Pacific Petroleum Conference (APPEC) on Monday.
“We think in 2025 for the first time in a couple of years, first time since 2022, OPEC+ will increase production,” Burkhard said at the conference in Singapore organized by S&P, as carried by Reuters.
Last week, the OPEC+ alliance led by Saudi Arabia and Russia decided to delay the unwinding of its production cuts that were planned to begin in October. The first addition to supply, of 180,000 barrels per day (bpd), is now expected for December.
During a virtual meeting on Thursday, the eight OPEC+ members that were planned to start easing the cuts in October agreed that they would extend the current cuts until the end of November, “after which these cuts will be gradually phased out on a monthly basis starting December 1st, 2024.”
OPEC+ added the warning that it would still have “the flexibility to pause or reverse the adjustments as necessary”, referring to the additions to global supply.
The decision to delay the rise in OPEC+ supply came after oil prices crashed early last week to the lowest level in nine months, and the lowest so far this year. Amid weaker-than-expected Chinese demand, and concerns about near-term Chinese and U.S. demand, the prospect of OPEC+ adding supply as early as October had worried markets that the oversupply next year would be higher than previously thought.
Concerns about oil demand in China, fears of slowing U.S. and European economies, and hopes of a restart of Libya’s production halt also added to the bearish sentiment in the market in the past week.
The OPEC+ announcement of the delay to supply boost, however, did little to calm the markets and oil prices slumped on Friday to their lowest levels since June 2023 amid concerns about oil demand.
By Tsvetana Paraskova for Oilprice.com
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