The OPEC+ group decided on Thursday to extend its collective oil production cuts of 3.65 million barrels per day (bpd) through the end of 2026, solidifying the cartel’s cautious stance amid global demand concerns and rising output from non-OPEC+ producers.
During its December meeting, the group also announced a gradual unwinding of cuts starting in April 2025, a move designed to prevent oversupply risks, CNBC reports.
Here are the major takeaways from OPEC+’s latest meeting and how oil markets reacted to the news.
OPEC+ Key Announcements: Long-Term Cuts, Gradual Increases
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Extension of Output Cuts
OPEC+ confirmed the continuation of its collective cuts of 3.65 million bpd until the end of 2026. This includes both baseline adjustments and voluntary reductions. -
Voluntary Cuts Extended Through March 2025
Member countries implementing additional voluntary cuts of 2.2 million bpd, first announced in November 2023, will extend these reductions until the end of March 2025. -
Gradual Unwinding Over 18 Months
Starting in April 2025, OPEC+ plans to begin a phased increase in production. Instead of the originally anticipated 12-month timeline, the unwinding process will stretch over 18 months, concluding in September 2026. This slower pace reduces monthly additions to the market, helping avoid potential oversupply. -
Baseline Boost for UAE
The UAE will receive a 300,000 bpd increase to its production baseline starting in April 2025, phased in gradually over the same 18-month period. -
Extended Compensation Period
Member states that overproduced in the past will now have until June 2026 to compensate for excess output. -
Capacity Assessments Extended
The group extended its capacity assessment period to November 2026. This is a sensitive issue that often requires delicate negotiations among members, and it helps preserve unity within the group.
Analyst Insights
Amena Bakr, senior research analyst at Energy Intelligence, highlighted the significance of the extended timeline for unwinding production cuts: "By pushing voluntary cuts back three months and extending unwinding over 18 months, OPEC+ reduces monthly increments and creates a bigger cushion for compensation cuts. This demonstrates the group's commitment to managing markets cautiously."
Prior to the OPEC+ meeting, Goldman Sachs analysts, including Daan Struyven, stated: “The rise in compliance and the likely extension of cuts support our view of modest near-term upside to oil prices. We maintain our $76/bbl average 2025 Brent price forecast.”
Last week, Bank of America warned that uncertainties surrounding key producers like Saudi Arabia, OPEC, and Iran could still disrupt market dynamics.
"The fortunes of commodity exporters will depend on the interplay between negative tariff and interest rate shocks and the positive effects of fiscal easing in China," the bank said in its 2025 economic outlook.
Market Reactions
The oil market's immediate reaction to the OPEC+ announcements was negative, with prices dipping by about $1 per barrel after early reports of the deal.
Yet, oil futures managed to trim losses as much of the news aligned with expectations.
Front-month West Texas Intermediate futures – broadly tracked by the United States Oil Fund (NYSE:USO) – traded at $68.54 a barrel by 8:35 a.m. in New York, flat for the day.
Broader concerns about slowing global demand and rising non-OPEC+ production continue to weigh on market sentiment.
The muted oil market reaction extended to U.S.energy equities.
The Energy Select Sector SPDR Fund (NYSE:XLE) edged up by 0.1% in premarket trading. Major oil players Exxon Mobil Corp. (NYSE:XOM) and Chevron Corp. (NYSE:CVX) also traded flat.
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