The OPEC+ alliance, which includes Saudi Arabia and Russia, two of the world’s Top 3 oil producing countries, met in Riyadh, Saudi Arabia at the 37th OPEC and non-OPEC Ministerial Meeting. The group reaffirmed their commitment to the Declaration of Cooperation (DoC) and extended oil production levels until the end of 2025. They will continue using independent sources to guide 2026 production levels.
Although the decision extends voluntary production cuts of 2.2 million BPD announced last November into the next year, it gradually eases some reductions starting in October 2024.
This decision, aimed at stabilizing crude prices and balancing market demands, reflects Saudi Arabia’s efforts to reconcile diverse member interests. The alliance will continue to monitor market conditions and adjust strategies accordingly. Notably, the UAE will see a ~10% boost in its production target next year, following intense negotiations.
The Joint Ministerial Monitoring Committee (JMMC) will meet bi-monthly to monitor market conditions and compliance, with the authority to call additional meetings if necessary. The importance of full conformity to production agreements was emphasized, and the next OPEC and non-OPEC Ministerial Meeting is scheduled for December 1, 2024.
Although OPEC+ cuts and Middle Eastern tensions reduced global crude supply by nearly 6%, oil prices have dropped roughly 10% since peaking in early April. Brent crude, the global benchmark, has fallen from $91 in April to $82 per barrel, while West Texas Intermediate (WTI) dropped from nearly $87 to $78.
According to the International Monetary Fund, Saudi Arabia needs Brent crude at around $81 per barrel to balance its budget. But OPEC has had an increasingly difficult time controlling prices due to the ongoing expansion of U.S. crude production.
In a press release from S&P Global Commodity Insights, Bhushan Bahree, Executive Director, S&P Global Commodity Insights said, “Two years ago, at this time OPEC+ output was 2.2 million b/d higher than it is now. Total non-OPEC+ crude oil output is 3.1 million higher now, with more than half that growth coming from the United States alone. Put another way, OPEC+ has had to make room for the rising output of others or face downward pressure on prices.”
In addition to record U.S. oil output increasing supply, weak demand concerns in China and other major economies have also contributed to falling oil prices.
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