OPEC+ extends oil output cuts amid global growth concerns: Report

In a bid to strengthen the oil market against concerns over global growth and escalating output from non-member countries, OPEC+ members, led by Saudi Arabia and Russia, have agreed to prolong voluntary oil output cuts into the second quarter of the year.

According to Reuters, this decision, announced on Sunday, entails maintaining cuts of 2.2 million barrels per day (bpd), with Saudi Arabia and Russia leading the charge.

Saudi Arabia, acting as the de facto leader of OPEC, committed to sustaining its voluntary cut of 1 million bpd until the end of June, holding its output steady at around 9 million bpd.

Concurrently, Russia, at the helm of OPEC+ allies, disclosed plans to slash oil production and exports by an additional 471,000 bpd in the upcoming quarter, highlighting a rising reliance on production cuts to balance the market.

"This decision sends a message of cohesion and confirms that the group is not in a hurry to return supply volumes, supporting the view that when this finally happens, it will be gradual," Reuters quoted analysts at investment bank Jefferies as saying.

The unexpected move by Russia to further reduce output has garnered attention from market analysts, with UBS analyst Giovanni Staunovo acknowledging the potential price-lifting impact if these cuts are fully implemented.

The oil market has encountered support in 2024 amidst escalating geopolitical tensions and Houthi attacks on Red Sea shipping.

However, apprehensions regarding economic growth have lingered.

Despite widespread anticipation of OPEC+ maintaining existing cuts, Russia's announcement of additional reductions has the potential to provide further buoyancy to prices, as stated by analysts.

Brent crude settled at $83.55 a barrel on Friday, marking an increase of $1.64, or 2 per cent, and reflecting a year-to-date surge of over 8 per cent.

Individual OPEC+ members revealed their contributions to the extended cuts, with Iraq, UAE, Kuwait, Algeria, and Oman among those affirming their commitment to maintaining reduced output levels throughout the second quarter.

Kazakhstan, likewise, pledged to extend voluntary cuts through the same period.

The collective efforts of OPEC+ since late 2022 have resulted in pledged cuts amounting to approximately 5.86 million bpd, equating to roughly 5.7 per cent of daily world demand, according to Reuters calculations.

Amidst uncertainties surrounding the oil demand outlook for the year, OPEC projects strong demand growth of 2.25 million bpd, primarily driven by Asia, while the International Energy Agency (IEA) foresees more modest growth of 1.22 million bpd.

Additionally, the IEA anticipates oil supply to reach a record high of about 103.8 million bpd in 2024, largely propelled by producers outside OPEC+, including the United States, Brazil, and Guyana.

(With inputs from Reuters)