OPEC+, made up of the Organization of the Petroleum Exporting Countries and its allies, including Russia, will extend voluntary production cuts into the second quarter, Saudi Arabia’s official press agency said Sunday.
The move was widely anticipated and signals that the producers are in no rush to restore lost volume to the market amid uncertainty over the outlook for demand, analysts said.
Citing an Energy Ministry source, the Saudi press agency said Saudi Arabia would extend its voluntary production cut of 1 million barrels a day, which was implemented in July 2023, until the end of the second quarter in coordination with some OPEC+ participating countries.
That 1 million-barrels-a-day cut is in addition to a cut of 500,000 barrels a day previously announced by Saudi Arabia that runs until the end of this year.
The announcement “does not come as a surprise. However, the decision sends a message of cohesion and confirms that the group in not in a hurry to return supply volumes, supporting the view that when this finally happens, it will be gradual (we expect in 3Q, as demand gets seasonally stronger),” said Giacomo Romeo, an analyst at Jefferies, in a note.
An extension beyond the second quarter, however, remains much more uncertain, Romeo said, and will put the focus on the next meeting of OPEC+ officials in early June.
The decision extends cuts implemented by OPEC+ in late November. Oil prices have subsequently risen, but remain well below 2023 highs set in the fall. Even the Israel-Hamas conflict and the threat that it could spread to threaten oil supplies from the Middle East has failed to push crude back toward those highs.
Crude rallied last week, with May Brent
BRN00,
BRNK24,
ending Friday at $83.55 a barrel on ICE Futures Europe. Brent, the global benchmark, is up 8.5% so far in 2024 but remains more than 13% below its 52-week high set on Sept. 26 at $96.55 a barrel. May West Texas Intermediate crude
CL00,
the U.S. benchmark
CL.1,
CLK24,
ended Friday at $79.97 a barrel on the New York Mercantile Exchange, up 11.6% in the year to date and leaving it 14.6% below its 52-week high at $93.68 set on Sept. 27.