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 news agency said on Sunday.
The move was widely expected and signals that producers are in no rush to restore lost volume to the market amid uncertainty over the demand outlook, analysts said.
Citing a source at the Ministry of Energy, the Saudi Press Agency said that Saudi Arabia will extend the voluntary production cut of 1 million barrels per day, implemented in July 2023, until the end of the second quarter in coordination with some countries participating in OPEC+.
The 1 million bpd cut comes on top of the 500,000 bpd cut previously announced by Saudi Arabia and which will last until the end of this year.
The announcement “is not a surprise. However, the decision sends a message of cohesion and confirms that the group is in no rush to restore supply volumes, supporting the view that when this finally happens, it will be gradual (we expect in Q3, as demand seasonally becomes stronger) ,” Giacomo Romeo, an analyst at Jefferies, said in a note.
An extension beyond the second quarter, however, remains much more uncertain, Romeo said, and will focus attention on the next meeting of OPEC+ officials in early June.
The decision extends the cuts implemented by OPEC+ to the end of November. Oil prices have subsequently risen, but remain well below the 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 failed to bring crude oil back to those highs.
Crude oil rallied last week, with May Brent BRN00,
BRNK24,
closing Friday at $83.55 a barrel on ICE Futures Europe. Brent crude, the global benchmark, has risen 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 oil CL00,
the US benchmark CL.1,
CLK24,
closed Friday at $79.97 a barrel on the New York Mercantile Exchange, up 11.6% year to date and leaving it 14.6% below its 52-week high of $93.68 set on September 27th.