The OPEC+ alliance, which includes top oil producers Saudi Arabia and Russia, convened in Riyadh for the 37th OPEC and non-OPEC Ministerial Meeting, reaffirming their commitment to the Declaration of Cooperation (DoC). The alliance has extended current oil production levels through the end of 2025, while using independent sources to guide production decisions for 2026.
This move continues the voluntary production cuts of 2.2 million barrels per day (BPD) announced last November, but introduces a gradual easing of these reductions starting in October 2024. This strategy aims to stabilize crude prices and balance market demands, highlighting Saudi Arabia’s efforts to align the diverse interests within the alliance. OPEC+ will remain vigilant, adjusting their strategies based on market conditions. Notably, the UAE will see a ~10% increase in its production target next year following intense negotiations.
The Joint Ministerial Monitoring Committee (JMMC) will meet every two months to assess market conditions and ensure compliance, with the ability to call additional meetings if necessary. Full conformity to production agreements was emphasized, with the next OPEC and non-OPEC Ministerial Meeting scheduled for December 1, 2024.
Despite OPEC+ cuts and ongoing tensions in the Middle East reducing global crude supply by nearly 6%, oil prices have fallen approximately 10% since their peak in early April. Brent crude, the global benchmark, has declined from $91 in April to $82 per barrel, while West Texas Intermediate (WTI) has dropped from nearly $87 to $78 per barrel.
The International Monetary Fund indicates that Saudi Arabia requires Brent crude to be around $81 per barrel to balance its budget. However, controlling prices has become increasingly challenging for OPEC due to the significant rise in U.S. crude production.
Bhushan Bahree, Executive Director at S&P Global Commodity Insights, noted in a press release, “Two years ago, OPEC+ output was 2.2 million BPD higher than it is now. Meanwhile, non-OPEC+ crude oil output has increased by 3.1 million BPD, with over half of that growth coming from the United States alone. Essentially, OPEC+ has had to accommodate the rising output from others or face downward pressure on prices.”
Additionally, record U.S. oil output, combined with weak demand concerns in China and other major economies, has contributed to the decline in oil prices.
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