On Thursday, members of OPEC+ reached a voluntary agreement to reduce their oil production by a total of 2.2 million barrels per day (bpd) starting in early 2024. Saudi Arabia spearheaded this agreement by continuing its existing voluntary cut.
Benchmark world oil prices decreased by about 2%, partly because of the voluntary nature of the reductions and investor expectations before the conference that further supply cuts may be implemented.
OPEC+ countries, which produce over 40% of the oil worldwide, including Saudi Arabia, Russia, and others, met online on Thursday to talk about supply policy.
According to JP Morgan analyst Christyan Malek, the market's response suggests skepticism regarding the measures' overall effectiveness.
Setting new guidelines for members to fulfill their share, however, shows how much the members trust and support one another. For example, Brazil's decision to join OPEC+ is evidence of the group's strength in numbers.
The group talked about 2024 output in light of the market's expected glut and the impending expiration of Saudi Arabia's 1 million bpd cut.
In an effort to stabilize the market and sustain prices, OPEC+ has already reduced its output by roughly 5 million barrels per day to about 43 million barrels per day.
Following the meeting, OPEC released a statement stating that the eight producers' combined restrictions totaled 2.2 million bpd. An extension of the 1.3 million bpd voluntary reduction from Saudi Arabia and Russia is included in this number.
200,000 of the 900,000 bpd of extra cuts that were promised on Thursday come from Russia's fuel exports; the remaining amounts are split among the six members.
According to Alexander Novak, Russia's deputy prime minister, the voluntary cut will cover both products and crude.
Iraq announced that it would reduce output by an additional 220,000 barrels per day in the first quarter, while the UAE claimed that it had agreed to reduce output by 163,000 barrels per day.
Producers from Saudi Arabia, the UAE, Russia, Kuwait, Kazakhstan, Iraq, and Algeria stated that, subject to market conditions, cuts will be gradually undone after the first quarter.
With prices having dropped from around $98 in late September, OPEC+ is concentrating on reducing output as worries about slower growth in the economy in 2024 and supply surplus forecasts are increasing.
This month, the International Energy Agency projected that demand growth for 2024 will slow down as the last vestiges of the post-pandemic economic bounce fade and as increasing energy efficiency, growing fleets of electric vehicles, and structural factors make a comeback.
Brazil, a producer ranked in the top 10, was also extended an invitation by OPEC+ to join the organization. The minister of energy for the nation stated that they intended to join in January.
The United Arab Emirates, an OPEC member, is hosting the UN's COP28 climate summit, which opens simultaneously with the OPEC+ gathering.