Opec+, the oil-producing coalition led by Saudi Arabia and Russia, has announced a significant delay in its production plans for 2025. The group will push back the reintroduction of 2.2 million barrels per day (b/d) until April and extend the timeline for this increase over the next 18 months. This decision comes after they had initially planned to start this increase in January.
Additionally, the United Arab Emirates will also postpone its planned increase of 300,000 b/d until April, according to Opec’s announcement on Thursday. As a result, analysts predict that Opec+ will produce about 800,000 b/d less oil in 2025 than initially expected, should its members adhere to agreed quotas.
Paul Horsnell, head of commodities at Standard Chartered, remarked on the significant impact of this change, stating, “It takes a huge amount of oil out of the 2025 plan. Two-thirds of the oil they were expected to bring on is now expected in 2026.”
Following this news, the price of Brent crude was slightly down by 0.1% at $72.26, while West Texas Intermediate crude fell by 0.3% to $68.35.
This decision from Opec+ comes on the heels of nearly an 11% drop in oil prices since their previous meeting in June when they had indicated a gradual unwinding of earlier production cuts starting in September.
Amrita Sen, founder of the consultancy Energy Aspects, expressed optimism about the move, stating that it significantly reduces the predicted oversupply in crude oil for the upcoming year. However, she noted that market sentiment remains cautious, partly due to speculation surrounding U.S. oil policy.
The International Energy Agency had previously warned that non-Opec countries were set to boost oil production by 1.5 million b/d in 2025. Even with Opec+ maintaining its production cuts, there is an expected oversupply exceeding 1 million b/d next year, although this extra supply is seen as a buffer against potential geopolitical uncertainties.
Helima Croft from RBC Capital Markets emphasized that Opec is taking a cautious approach, choosing to monitor the market’s demand outlook before making further production decisions. She stated, “Given the uncertainty in the market, Opec opted to hit the pause button, watch and wait, and revisit the issue in spring.”