Eight member nations of the OPEC+ alliance announced on Sunday that they would be extending their current oil supply cuts until the end of December. This decision is intended to stabilize oil prices amid fluctuating demand and increasing supply levels, with the approaching U.S. presidential election also being a consideration.
However, analysts predict that this move may have a limited effect on prices.
The Organization of the Petroleum Exporting Countries (OPEC), based in Vienna, confirmed that these eight nations will continue with the voluntary production reductions of 2.2 million barrels per day for one more month, lasting until December 2024.
The countries participating in the extension include key producers like Saudi Arabia and Russia, alongside Algeria, Iraq, Kazakhstan, Kuwait, Oman, and the United Arab Emirates.
These countries have held off on boosting output due to concerns over sluggish demand, which has kept oil prices under pressure recently.
Ipek Ozkardeskaya, a senior analyst at Swissquote Bank, described this extension as a “logical response” to the downward pressure on oil prices, caused by slow demand from China and a weakening global economic outlook, coupled with a sufficient supply from non-OPEC producers.
However, Ozkardeskaya noted that any price increases would likely be short-lived unless OPEC+ implements further production cuts. She also pointed out that the group’s efforts so far haven’t led to a lasting rise in prices, as OPEC+ now controls less than half of the world’s oil output.
Jorge Leon, an analyst with Rystad Energy, added that OPEC+ is closely watching the outcome of the U.S. presidential election on November 5, as it will significantly influence the oil market. Leon suggested that if former president Donald Trump wins, a trade war could ensue, potentially lowering oil demand.
OPEC+ ministers are scheduled to meet in early December at the organization’s headquarters in Vienna. However, with this latest announcement, the eight nations have already decided to keep their production cuts in place until at least early 2025.
Although OPEC+ had previously indicated during their June meeting that they aimed to raise production from October, they had emphasized that this decision could be revisited depending on market conditions.
