OPEC+ Meeting: What to Expect and How It Affects Oil Production
By Alex Lawler and Yousef Saba
LONDON (Reuters) – OPEC+ oil producers are gearing up for a crucial meeting on June 2 to decide their next steps regarding output policies. One of the key areas under consideration is whether to extend voluntary production cuts of approximately 2.2 million barrels per day (bpd) beyond the initial expiration in the first half of 2024.
The Journey So Far
The voluntary cuts by the Organization of the Petroleum Exporting Countries (OPEC) and its allies, known as OPEC+, have been a significant factor in the global oil market. These cuts, totaling 5.86 million bpd, represent about 5.7% of daily world demand and have been in effect since late 2022.
Recent Developments
The most recent round of voluntary cuts totaling 2.2 million bpd was announced by individual countries on Nov. 30, 2023. Originally set to expire at the end of the first quarter of 2024, the cuts were extended until the end of June, with Russia adjusting its share of the reduction.
A significant portion of the 2.2 million bpd cut comes from the extension of existing voluntary cuts by Saudi Arabia and Russia from 2023, amounting to 1.3 million bpd. This means that the additional element of the cut accounts for around 900,000 bpd.
Previous Cutbacks
Prior to the most recent round of cuts, OPEC+ had already implemented reductions totaling approximately 5 million bpd. This included 1.3 million bpd in voluntary cuts by Saudi Arabia and Russia earlier in 2023, along with 3.66 million bpd agreed upon in previous decisions.
Among the 3.66 million bpd, 2 million bpd were agreed upon by OPEC+ members in late 2022, with additional voluntary cuts of 1.66 million bpd by some members in April 2023. In June 2023, OPEC+ extended the 3.66 million bpd cuts until the end of 2024.
Impact on Targets
The agreed-upon cuts and production targets for the first half of 2024 are critical for understanding the future trajectory of oil production. The table below provides details of the cuts pledged by various OPEC+ members and their corresponding targets:
Country | Voluntary 2024 cuts (million bpd) | Implied H1 2024 production target (million bpd) | Actual output after H1 2024 (million bpd) |
---|---|---|---|
Algeria | 0.051 | 0.908 | 0.959 |
*International Energy Agency figures exclude OPEC members Iran, Libya, and Venezuela, which are exempt from making cuts.
**Russia initially committed to deeper cuts but later adjusted its figures. The table reflects the initial pledge.
***The figure includes the total cuts for Bahrain, Brunei, Malaysia, Sudan, and South Sudan.