On November 3, 2024, the Organization of the Petroleum Exporting Countries, in alliance with its external partners grouped under OPEC+, announced a one-month extension of voluntary production reductions. Eight countries, including market heavyweights such as Saudi Arabia, Russia, Iraq and the United Arab Emirates, will maintain their cuts until the end of December 2024.
Oil under pressure on the markets
These prolonged reductions, with a total volume of 2.2 million barrels per day, are mainly aimed at stabilizing prices on the oil markets. While Brent is trading around $72 and WTI is near $70, this measure is seen by OPEC+ as a necessary lever to curb a possible further decline. Producer countries fear that excess supply will further deteriorate prices in the coming weeks, which could complicate their efforts to guarantee stable oil revenues.
The decision to extend production cuts illustrates the strategic prudence of OPEC+, which prefers to avoid a rapid opening of the floodgates. Initially, the alliance had announced its intention to increase production from October 2024, but low prices and gloomy demand forecasts motivated this reassessment. By opting for a short-term extension, OPEC+ retains a certain flexibility to adjust its strategy according to market conditions, while sending a signal of price support. This maintenance of the reduction, despite potential pressures, also shows a desire to preserve the balance between immediate profitability and resilience in the face of unpredictable variations in demand.
Will fuel prices rise?
The OPEC+ decision could nevertheless have consequences for consumers. Indeed, a restricted supply could result in an increase in fuel prices at the pump, at a time when several major economies are experiencing inflationary pressure. If the OPEC+ meeting scheduled for December 2024 in Vienna were to confirm a reduction policy beyond the end of the year, this could fuel further price increases.
This extension of production cuts also highlights the complexity of current dynamics in the oil sector. OPEC+, although displaying a united front, faces global economic uncertainties, as well as a global energy transition that could reduce dependence on oil in the medium term. With the oil market particularly sensitive to fluctuations in demand, industry observers are closely monitoring the situation in China, which remains a key driver of global energy demand. Uncertainties linked to trade tensions, the monetary policies of major economies and the elections in the United States further add to producers' concerns. The reassessment of OPEC+ strategies for 2025 could therefore depend on international economic and political developments.
