Crude Oil

OPEC+ Extends Oil Cuts to 2025 to Combat Low Prices and Tepid Demand

Published

3 months ago

June 3, 2024

The Organization of the Petroleum Exporting Countries and its allies, collectively known as OPEC+, agreed on Sunday to extend their oil output cuts well into 2025.

This strategic extension is designed to shore up the market amid lackluster demand growth, high interest rates, and increasing competition from U.S. oil production.

Prolonged Cuts Amid Economic Uncertainty

Since late 2022, OPEC+ has implemented a series of deep output cuts to address declining oil prices and fluctuating demand. Currently, the group is reducing output by 5.86 million barrels per day (bpd), which represents approximately 5.7% of global demand.

This includes a substantial cut of 3.66 million bpd, originally set to expire at the end of 2024, and additional voluntary reductions totaling 2.2 million bpd, scheduled to conclude at the end of June 2024.

Under the new agreement, the 3.66 million bpd cut will be extended by a year, now expiring at the end of 2025.

Meanwhile, the voluntary cuts of 2.2 million bpd will be extended by three months to the end of September 2024. These cuts will then be gradually phased out over a year, starting in October 2024 and ending in September 2025.

Market Dynamics and Strategic Adjustments

This extension comes as Brent crude oil prices hover around $80 per barrel, below the fiscal break-even point for many OPEC+ members.

Concerns over sluggish demand in China, the world’s largest oil importer, coupled with rising oil stocks in developed economies, have contributed to the downward pressure on prices.

Saudi Energy Minister Prince Abdulaziz bin Salman said, “We are waiting for interest rates to come down and a better trajectory when it comes to economic growth … not pockets of growth here and there.”

The group’s cautious approach reflects a broader strategy to avoid a sudden influx of oil into the market, which could further depress prices. By extending and gradually phasing out cuts, OPEC+ aims to manage supply carefully while monitoring demand recovery.

Impact on Global Oil Market

The decision is expected to ease market fears of a sudden increase in OPEC+ production, which could exacerbate current oversupply issues.

Amrita Sen, co-founder of the Energy Aspects think tank, noted, “The deal should allay market fears of OPEC+ adding back barrels at a time when demand concerns are still rife.”

The International Energy Agency (IEA) projects that demand for OPEC+ oil, along with stock levels, will average around 41.9 million bpd in 2024, lower than OPEC’s estimates. This discrepancy underscores the uncertainties facing the global oil market.

Looking Ahead

While the extension of cuts marks a significant step towards stabilizing the market, challenges remain.

The United Arab Emirates (UAE), for instance, secured a new output target allowing for a gradual increase in production by 0.3 million bpd, reflecting its push for a higher quota.

Also, discussions on individual capacity targets for 2025 have been postponed to November 2025, highlighting ongoing negotiations within the group.

Prince Abdulaziz played a crucial role in orchestrating the deal, inviting key ministers to Riyadh for face-to-face discussions despite the primarily online meeting format. This hands-on approach was instrumental in reaching a consensus.

As OPEC+ prepares for its next meeting on December 1, 2024, the group’s ability to navigate complex market dynamics and internal negotiations will be critical in maintaining market stability.

The extended cuts demonstrate OPEC+’s commitment to addressing current economic challenges and ensuring a balanced oil market in the years ahead.

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Samed Olukoya

Is the CEO and Founder of Investors King Limited. He is a seasoned foreign exchange research analyst and a published author on Yahoo Finance, Business Insider, Nasdaq, Entrepreneur.com, Investorplace, and other prominent platforms. With over two decades of experience in global financial markets, Olukoya is well-recognized in the industry.

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Crude Oil

Oil Prices Rebound on OPEC+ Output Delay Talks and U.S. Inventory Drop

Published

2 days ago

September 5, 2024

Samed Olukoya

Oil prices made a modest recovery on Thursday on the expectations that OPEC+ may delay planned production increases and the drop in U.S. crude inventories.

Brent crude oil, against which Nigerian oil is priced, rose by 66 cents, or 0.9% to $73.36 per barrel while U.S. West Texas Intermediate (WTI) crude appreciated by 64 cents or 0.9% to $69.84 per barrel.

The rebound in oil prices was a result of the American Petroleum Institute (API) report that revealed that the U.S. crude oil inventories had fallen by a surprising 7.431 million barrels last week, against analysts 1 million barrel decline projection.

The decline signals better than projected demand for the commodity in the United States of America and offers some relief for traders on global demand.

John Evans, an analyst at PVM Oil Associates, attributed the rebound in crude oil prices to the API report.

He said, “There is a pause of breath and light reprieve for oil prices.”

Also, discussions within the Organization of the Petroleum Exporting Countries (OPEC) and its allies, collectively known as OPEC+, are fueling speculation about a potential delay in planned output increases.

The group was initially expected to increase production by 180,000 a day in October 2024.

However, concerns over softening demand in China and potential developments in Libya’s oil production have prompted the group to reconsider its strategy.

Despite the recent rebound, analysts caution that lingering uncertainties around global oil demand may continue to weigh on prices in the near term.

Crude Oil

Again NNPC Raises Petrol Price to N897/litre

Published

4 days ago

September 4, 2024

Investors King

The Nigerian National Petroleum Company (NNPC) Limited has once again increased the price of Premium Motor Spirit (PMS) from N855 per litre on Tuesday to N897 on Wednesday.

The increase was after Aliko Dangote, the Chairman of Dangote Refinery, announced the commencement of petrol production at its refinery.

The continuous increase in pump prices has raised concerns among Nigerians despite the initial excitement from the refinery announcement.

According to the Nigerian Midstream and Downstream Petroleum Regulatory Authority (NMDPRA), the 650,000 barrels per day refinery will supply 25 million litres of petrol to the Nigerian market daily this September.

This, NMDPRA said will increase to 30 million litres per day in October.

However, the promise of increased fuel supply has not yet eased the situation on the ground.

Tunde Ayeni, a commercial bus driver at an NNPC station in Ikoyi, said “I have been in the queue since 6 a.m. waiting for them to start selling, but we just realised that the pump price has been changed to N897. This is terrible, and yet they still haven’t started selling the product.”

The price hike comes as NNPC continues to struggle with sustaining regular fuel supply.

On Sunday, the company warned that its ability to maintain steady distribution across the country was under threat due to financial strain.

NNPC cited rising supply costs as the cause of its difficulties in keeping up with demand.

Crude Oil

Brent and WTI Steady After Recent Losses as Libyan Oil Halt Continues

Published

5 days ago

September 2, 2024

Samed Olukoya

Oil prices stabilised on Monday as Libyan oil exports remained halted and following losses at the end of last week on expectations of higher OPEC+ production from October and signs of sluggish Chinese and U.S. demand.

Brent crude oil, against which Nigerian oil is priced, dipped by 6 cents, or 0.08% to close at $76.87 a barrel , while U.S. West Texas Intermediate crude edged up 8 cents, or 0.11% to $73.63.

Monday marked a public holiday in the U.S. market.

On Friday Brent and WTI lost 1.4% and 3.1%, respectively.

Oil exports at major Libyan ports were halted on Monday and production curtailed across the country, six engineers told Reuters, continuing a standoff between rival political factions over control of the central bank and oil revenue.

Libya’s Arabian Gulf Oil Company resumed output of around 120,000 barrels per day (bpd) on Sunday, to feed a power plant at the port of Hariga.

“The current disturbances in Libya’s oil production could provide room for added supply from OPEC+. But these fluctuations have become quite normal over the last few years, meaning any outages will probably be shortlived; with the news flow indicating signals for a restart of production have already been given,” said Bjarne Schieldrop, chief commodity analyst at SEB.

The Organization of the Petroleum Exporting Countries (OPEC) and its allies, together known as OPEC+, is set to proceed with planned increases to oil output from October, six sources from the producer group told Reuters.

Eight OPEC+ members are scheduled to boost output by 180,000 barrels per day (bpd) in October as part of a plan to begin unwinding their most recent supply cuts of 2.2 million bpd while keeping other cuts in place until the end of 2025.

Both Brent and WTI have posted losses for two consecutive months as U.S. and Chinese demand concerns have outweighed recent disruptions in Libya and supply risk related to conflict in the Middle East.

More pessimism about Chinese demand growth surfaced after an official survey showed on Saturday that manufacturing activity sank to a six-month low in August as factory gate prices tumbled and owners struggled for orders.

“The softer-than-expected China PMI released over the weekend heightens concerns that the Chinese economy will miss growth targets,” IG market analyst Tony Sycamore said.

In the U.S., oil consumption in June dropped to seasonal lows last registered during the COVID-19 pandemic in 2020, Energy Information Administration data showed on Friday.