The group of oil-producing nations, OPEC+, has agreed a deal that would extend a critical portion of its oil supply cuts well into 2025, as it looks stabilise the market amid high interest rates and weak demand.
The Organization of the Petroleum Exporting Countries and allies led by Russia, agreed to extend the cuts of 3.7m barrels per day (BPD) by a year until the end of 2025 and lengthen the cuts of 2.2m bpd by three months until the end of September.
Three sources cited by Reuters said OPEC+ would spend one year gradually phasing out cuts of 2.2m bpd starting from October 2024 until the end of September 2025.
OPEC+ has been cutting back oil supply in a bid to avert a global surplus and shore up prices since late 2022. A lull in world fuel consumption, soaring production from OPEC’s rivals and uncertainty in China’s economic outlook has brought about a need for caution.
Ahead of the meeting, which took place in Riyadh on Sunday, analysts had forecast the extension of supply reductions by a few months due to falling oil prices and lower demand.
Oil prices are trading near $80 per barrel, which is lower than what many members would need to shore up their budgets.
Despite the OPEC cuts and ongoing conflict in the Middle East, oil prices have tumbled by around 10 per cent since reaching a five month peak at the beginning of April.
The new agreement means eight countries participating in the extra cuts will have added around 750,000 barrels per day to the market by January.
It also comes on the same day the Saudi state-run oil giant Aramco began a massive share sale as it looks to raise around $12bn.
Additional reporting by Reuters