The oil producing countries united within “OPEC+” decided, at the end of their 37e meeting this June 2, to extend their agreement relating to crude production until 2025. In fact, this production will increase. Explanations.
What did OPEC+ decide on June 2?
OPEC+ producers (which has brought together OPEC members and allies since 2016 to further influence prices) have renewed for the year 2025 a global reference production volume of 39.725 million barrels of crude oil per year. day (Mb/d), including 24.135 Mb/d for OPEC member countries and 15.59 Mb/d for non-OPEC producers(1).
Or a little less than 38% of total oil production expected in 2025 according to forecasts from the International Energy Agency (104.5 Mb/d).
But this reference volume “ does not take into account voluntary reductions », underlines Jérôme Sabathier, head of the Economics and environmental assessment department at IFP Energies nouvelles.
“ Since the end of 2022, OPEC+ has put in place a series of production reduction agreements, supplemented by voluntary reductions in the production of certain countries, for a total of 5.9 Mb/d », he recalls.
This June 2, OPEC+ thus “ decided to extend the reduction agreements of 3.7 Mb/d until the end of 2025 and the voluntary production reductions of 2.2 Mb/d until the end of September 2024. From October 2024, the latter will be gradually reduced until the end of September 2025. Ultimately, according to the new agreements, OPEC+ production is expected to be 35.6 Mb/d between June and September 2024, ending the year at 36.1 Mb/d and gradually reaching 38.1 Mb/d at the end of 2025. (Iran, Libya and Venezuela excluded because they are not subject to quota) “.
Which countries are currently voluntarily reducing their production?
Eight of the main OPEC+ producers (in order of production: Saudi Arabia, Russia, Iraq, United Arab Emirates, Kuwait, Kazakhstan, Algeria, Oman) have decided to maintain their voluntary production reductions (amounting therefore to 2, 2 Mb/d cumulative) until September 2024, before eliminating them by September 2025. In other words, they will increase their respective production.
For example, Saudi Arabia, which currently has a crude production quota of 8.978 Mb/d, will increase this production each month from October 2024 (9.061 Mb/d) until September 2025 (9.978 Mb/d). j), increasing its production by one million barrels per day during this period.
A specific decision regarding the United Arab Emirates
This agreement of June 2 “ reflects OPEC+’s desire to maintain support for crude oil prices, while gradually easing production constraints, in the face of criticism from some members such as the United Arab Emirates “.
OPEC+ has precisely validated an increase in the reference production of the United Arab Emirates (UAE) which should gradually increase by 300,000 barrels per day between January and the end of September 2025 (compared to the current level of around 2.9 M/ j).
“ Last year, amid a bitter conflict (particularly with the UAE), the group asked external consultants to assess the oil production capacity that members are able to produce, with a view to setting individual quotas for 2025 », specifies Jérôme Sabathier.
The alliance of oil producers has “ decided to extend the assessment period until the end of November 2025, in order to serve as a guide for the new baseline production levels for 2026. It therefore appears that Kazakhstan and Iraq will not get higher production targets before 2026 » (these two countries pumped more than authorized levels this year and hoped to see their production quota increase in the months to come). But ” the group however agreed on a new production target for the United Arab Emirates “.
What impact?
OPEC+ is banking on production cuts by its members to support prices since the end of 2022. In fact, the price of a barrel is not increasing as much as the producers of this alliance would like.
“ A price around $90/bbl would satisfy many OPEC+ countries but Saudi Arabia is aiming for $100/bbl (level required according to the IMF to finance its economic and diversification programs) », indicates Jérôme Sabathier, while new shares of Saudi Aramco were put on the market (oil prices are currently around $80 per barrel).
The first reactions following the June 2 meeting were “ mixed, with some analysts highlighting the upward impact on prices of this extension of production cuts, while others questioned the market’s capacity to absorb additional barrels from October 2024, particularly if the economic outlook turned out to be weaker than expected » (OPEC+ estimates that global consumption will be maintained in 2024 while the IEA has revised its estimates downward).
Jérôme Sabathier judges that “ the result of the OPEC+ meeting was widely anticipated by the market: an extension of production cuts while waiting for more information regarding the evolution of demand on the 2e semester and in 2025 “.
When will the next major OPEC+ decisions take place?
The 38e OPEC+ producers summit is scheduled for 1er December 2024(2). The review of the production quotas of each member should be discussed at the end of 2025.
“ Despite disagreements(3)OPEC+ has managed to control the oil market relatively well in recent times », considers Jérôme Sabathier. “ The next important step for the cohesion of the group will be the allocation of new quotas for 2026 “.
