OPEC+ agreed on Sunday to extend most of its deep oil production cuts until 2025, as the group seeks to support the market amid weak demand growth, high interest rates and increase in competing American production.
Here’s what market analysts said about the announcement:
Daan Struyven, head of oil research at Goldman Sachs:
“Although OPEC+ has extended all three levels of production cuts, we consider the meeting bearish as 8 OPEC+ countries have already signaled that they will phase out the 2.2 mb/d voluntary cuts increases over the 2024Q4-2025Q3 period, despite recent upside inventory surprises.”
“The communication of a phased disengagement reflects a strong desire to bring back production from several members given the strong reserve capacity.”
“As a result of the bearish meeting, and given recent upside surprises in stocks relative to our expectations, we now view the risks to our $75-90 range for Brent as skewed to the downside.”
Amarpreet Singh, energy analyst at Barclays:
“The results of the OPEC+ meeting were slightly negative compared to our view on basic balances, as the rollover of additional voluntary adjustments until the end of the third quarter and a slower phase-out than expected “These adjustments were more than offset by the scale of the phase-out and revision of the UAE target for next year.”
“The rollover of further voluntary cuts for another quarter and associated comments from key ministers suggest that it would not be surprising to see the group sidelined if market conditions do not favor a gradual phase-out of production cuts from of the 4th quarter 24.
Kim Fustier, head of European oil and gas research at HSBC:
“This result was widely expected by the market.
“How OPEC+ ends its series of multiple and complex cuts totaling 5.8 million barrels per day remains one of the biggest questions for the oil market. The agreement provides some clarity for the next 19 months, but questions remain, in particular on how the 3.66 mbd of collective and first phase voluntary reductions will be resolved after the end of 2025.”
Omar Nokta, analyst at Jefferies:
“We consider this a modest positive as we did not expect these barrels to return before the end of 2025.”
“At the start of the year, when Brent prices hit $90 a barrel, there was growing expectation that these voluntary reductions would begin to unwind at some point in 2024, but falling prices has since refuted this view The gradual cessation of these reductions in October is therefore a pleasant surprise. Oil companies continue to benefit from significant profits despite the reductions implemented by OPEC+ since the start of 2023. Given that new non-OPEC supply is planned for 2025, in line with forecasts of demand growth, the full unwinding of voluntary OPEC+ cuts may be a long time coming.”
Christyan F Malek, Global Head of Energy Strategy and Head of EMEA Oil & Gas Equity Research at JPMorgan:
“The third quarter production increase suggests the alliance is comfortable with current inventory levels and should provide the market with a clearer view of OPEC’s confidence in supply fundamentals and demand.”
“In other words, if these volume additions are met, this should indicate a healthy outlook for nominations and therefore ultimately constitutes bullish demand, although in the short term we may see some pressure on the fall on oil prices It is clear that the challenge for the group will be to hold or reduce if demand does not prove as robust and we believe that their strong cohesion should allow greater flexibility, if necessary.
