The cartel put on a unified front by declaring that members promised to adhere to the individual quota of each. In this context, the assessment procedures by the third parties have been pushed back until November, 2026; this had been a highly contentious issue among the members in the past, though.
As for the main issue, easing the production cuts of 2.2 million bpd, the OPEC+ is going to push it back by yet another period of three months, up until April, 2025. After that, the easing will take place throughout an extended period of 18 months, not 12 months, up until September, 2026.
The UAE that campaigned for a higher production quota in private has been able to get it elevated to 300,000 bpd as its base level that is significant. It, however, has to wait until April, 2025, up until the easing of production cuts take place, if it ever does, though, because the OPEC+ has already postponed it three times, much to the dismay of consumers.
The delay in easing the production cuts, however, did not affect the market sentiment at all. As of Friday, before the markets closed, WTI and Brent were at $67.20 and $71.12 respectively.
The decision by the OPEC+, to wait for another period of three months in the new year, before easing the production cuts may be an attempt to watch how the new Trump administration unravels on the energy front, as they take the helm on January 20, 2025: President Trump has made it clear that he would cut the energy prices by half in order to tame the inflation; in addition, he would issue licences again for exploration of oil in the Federal lands, something that President Biden chose to reverse, when he began his presidential term. President Trump will not abandon his, “Drill, baby, drill” strategy for sure.
If there is a shale boom in the US, for instance, the OPEC+ may be compelled to push back the easing by a few more months or even a year. They made a controversial move in 2014 not to cut down on the production, when oil prices started falling; the OPEC+ decided to stick to its agreed production level, something that was interpreted as pushing the higher-cost shale producers against the wall.
At the time that the OPEC+ made the latest decision, two major factors that usually play a favourable role in maintaining the oil prices, aligned with the wishes of the oil producers: first, the US crude stocks has been down for two consecutive weeks; then, against all odds, China’s manufacturing PMI, the key indicator that reflects the factory activities in the world’s largest crude oil importer, showed the second successive growth for two months.
The unprecedented series of events that took place in Syria in a short period of time added yet another sense of anxiety in the region that is already mired in many conflicts. It may not change the status quo, though, despite the addition of yet another worry in the Middle East; it, however, may evolve in unexpected directions, sucking up many key players into it, unless sanity breaks out on the Syrian soil, amidst understandable chaos.
The bottom line is that there is enough supply in the oil markets and demand will grow, but not steeply or exponentially. OPEC+ cannot overlook this plain reality.
