The Organisation of the Petroleum Exporting Countries and its allies (OPEC+) have reached an agreement to postpone planned increases in oil production by three months. The decision comes as the group seeks to stabilise a market facing challenges from oversupply and slowing demand growth.
Agreement Reached Amid Challenges
According to Bloomberg, the three-month deferral was the primary proposal discussed during the negotiations and reportedly encountered no significant opposition. Final approval of the plan is expected on Thursday, delegates confirmed under conditions of anonymity due to the confidential nature of the discussions.
Last week, OPEC+ considered delaying a previously scheduled step-by-step production increase that was set to begin in January with an additional 180,000 barrels per day. The move comes amid concerns over a potential surplus in global oil supply, which has been pressuring prices downward.
Key Negotiation Points
The talks addressed compliance with existing output restrictions and the need for further cuts to offset previous overproduction. Delegates highlighted the hesitance of countries like Iraq, Russia, and Kazakhstan to implement new supply limits, further complicating negotiations.
The group has already postponed production increases twice this year due to weakened demand growth in China and rising output from the United States. Brent crude futures, a benchmark for global oil prices, have fallen by 17% since July and currently trade at approximately $73 per barrel in London.
Future Production Increases Still Expected
Despite the delay in broader production increases, some member states are set to raise output incrementally. The United Arab Emirates (UAE), for instance, has been granted the right to increase production by 300,000 barrels per day over 2025 as a recognition of its recent investments in oil production capacity. Kazakhstan is also expected to pose a challenge next year as it continues the expansion of the Tengiz oil field, potentially adding more barrels to the global market.
These developments highlight the ongoing challenge OPEC+ faces in maintaining market equilibrium. The group’s efforts to balance supply and demand are complicated by individual member states’ priorities and global economic trends.
Market Implications
OPEC+’s decision to defer production increases reflects its cautious approach amid a volatile market. Sluggish demand in key economies, including China, and increased production from non-OPEC countries have contributed to downward pressure on oil prices. The delay is seen as a temporary measure to prevent further price declines and avoid exacerbating the surplus.
However, analysts warn that even with the deferral, the anticipated rise in output from certain member states could test OPEC+’s ability to manage global supply effectively. This could further complicate the group’s efforts to sustain price stability in the coming year.
