Breaking News: OPEC+ Likely to Delay Easing Oil Production Cuts, Citi Research Predicts
OPEC+ is gearing up for a crucial virtual meeting on December 1, with analysts at Citi Research forecasting a delay in the planned easing of oil production cuts. The group, consisting of major oil-exporting nations and allies, had initially announced a gradual unwind of 2.2 million barrels per day of voluntary production cuts starting in June 2024. However, this plan has already faced multiple delays, pushing the potential start date to January 2025.
Citi strategists now believe that the scheduled easing of production cuts will be further postponed, with a new possible start date in April 2025. This decision comes amidst weakening global oil demand, an oversupply projection for 2025, and fragile market fundamentals. Citi estimates that global oil stocks could rise by around 1 million b/d in 2025, with prices averaging $60 per barrel for the year.
Key factors contributing to this anticipated delay include lower-than-expected demand from China, increasing non-OPEC+ production, and concerns among OPEC+ members about triggering price declines by introducing more oil to the market. While some members, like the UAE, Iraq, and Russia, are eager to boost output, others are cautious about the potential impact on prices.
Geopolitical tensions, such as the Russia-Ukraine conflict and uncertainties in the Middle East, along with proposed trade tariffs by U.S. President-elect Donald Trump, are further complicating the decision-making process. Trump’s plan for a 25% tariff on oil imports from Canada and Mexico could raise costs for U.S. refiners and consumers, potentially dampening oil demand.
By postponing the tapering of production cuts, OPEC+ retains the flexibility to adapt to changing market conditions. However, this strategy also limits their ability to take advantage of price spikes in case of supply disruptions. Citi analysts suggest that significant changes in OPEC+’s approach will likely hinge on notable shifts in market dynamics, such as a reduction in geopolitical risks or a swift recovery in demand.
Overall, OPEC+’s current strategy seems focused on navigating the complexities of a challenging and uncertain oil market, striving to maintain a delicate balance between supply and demand.
Analysis: OPEC+ is expected to delay easing oil production cuts, leading to potential price stability in the oil market. This could impact consumers by influencing fuel prices and overall energy costs. Geopolitical tensions and trade policies also play a crucial role in shaping oil market dynamics, highlighting the interconnected nature of global energy markets with broader economic and political factors.