OPEC+ is slowly making its inevitable pivot toward returning some oil supply
June 3, 2024
Key Observations:
OPEC+ has taken its first tentative step toward gradually unwinding oil production cuts made by eight of its members in November 2023. These cuts (collectively, 2.17 million b/d) followed two other large OPEC+ actions to curb oil supply: one by select members in Apr-23 (1.65 million b/d), the other at the group level in Oct-22 (2.00 million b/d).
The unwind would begin four months from now, progress over the following year, and involve only the Nov-23 cuts. The Oct-22 and Apr-23 cuts, due to expire at end 2024, would be extended for another year, through all 2025. This plan would keep an average 4.41 million b/d of OPEC+ oil supply off-market for an 18-month interval (relative to a pre-cuts 2022 baseline), even as UAE, Nigeria, and Congo bring new capacity online.
A total rollover through summer 2024 and gradual unwind of voluntary cuts in 2025 is more or less what the market expected. Oil futures prices changed little last night and into this morning, despite the teetering of the past two weeks.
Then, oil prices broke sharply lower as traders reassessed OPEC+’s oil supply plan in light of the downside surprise in the May-24 U.S. ISM and global demand risk more generally. Total futures volume in the NYM WTI and ICE Brent markets was 2.15 million lots (82nd percentile for past year).
Source: OPEC+, Blacklight Research. * Note: the chart accounts for (a) Angola’s late-2023 exit from OPEC, and (b) OPEC+’s decision to raise production targets in 2025 for UAE (+300kbd), Nigeria (+120kbd), and Congo (+1kbd).
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