The OPEC+ coalition has reached an agreement to prolong existing supply cuts until the middle of the year to prevent an oversupply, reports Bloomberg. Analysts foresee a continuation of voluntary production cuts until the second quarter of 2024, anticipating a sustained commitment to these measures.
The extension of voluntary cuts by Kuwait, amounting to 135,000 barrels per day, will persist until the end of the second quarter, maintaining production at 2.41 million barrels per day until June 2024.
Dr. Imad Al-Ateeqi, Deputy Prime Minister and Minister of Oil, as well as Chairman of the Board of Directors of Kuwait Petroleum Corporation, stated that this decision aligns with other OPEC+ members’ efforts and aims to support market stability. He noted that these additional reductions will be gradually reinstated in accordance with market conditions, emphasizing Kuwait’s cooperation within the OPEC+ framework.
Al-Ateeqi highlighted Kuwait’s previous voluntary reduction of 128,000 barrels per day announced in April 2023, which will persist until the end of December 2024. This additional cut underscores the collective precautionary measures taken by OPEC+ nations to uphold oil market stability and balance.
Regarding oil prices, Brent crude is nearing its fair value of approximately $85 per barrel, with the potential for escalation above $100 in the event of heightened Middle East conflicts, according to Bloomberg Intelligence. Recent estimates suggest a shift in price expectations, with several investment banks revising their forecasts upwards. Despite OPEC+ production cuts, oil prices have remained around $80 per barrel due to increased supplies from non-member producers and geopolitical tensions in the region.
Geopolitical risks, including conflicts in the Middle East and disruptions to oil shipments, have begun influencing oil prices, counteracting concerns over weak economic prospects and declining demand. Bloomberg Intelligence’s projections for oil prices consider various factors such as geopolitical risks, inflation expectations, refining margins, inventory levels, and market sentiment.
As OPEC+ gradually reduces production cuts, any decline in spare production capacity could lead to a panic-driven rise in oil prices. Currently, OPEC+ has about 6.4 million barrels per day of spare production capacity, mainly held by Saudi Arabia and the UAE. Under the existing OPEC agreement, production cuts are set to total 3.66 million barrels per day starting April.
OPEC anticipates robust demand growth, particularly in Asia, while the International Energy Agency expects slower growth. Despite challenges posed by rising production from non-member countries and economic uncertainties, OPEC+ remains committed to stabilizing the oil market.
