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OPEC+ meeting: where to now for oil prices in 2024?

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Crude prices are seeing very muted action at the start of the week with crude futures roughly flat across early European trading on Monday. The lack of volatility comes despite OPEC+ agreeing over the weekend that it will extend current production cuts through into the end of next year.

The cartel chose to extend about half its production cuts (3.66mn bpd) to the end of 2025 and will phase out a further 2.2mn bpd of cuts between October 2024 and September 2025. Hardly a surprise when Saudi Arabia is at this moment trying to get off a new stake in Aramco.

“Short take: the deal will remove fears that OPEC is about to walk from the majority of its production curbs, but it shows that demand is not there,” said Neil Wilson, Chief Market Analyst at Finalto.

US disinflation continues but is slackening. Consumption is slowing – down 2% in Q1. On the other hand, Asian factory output has improved with Japan’s May factory activity expanding for the first time in year whilst South Korea and China activity rose at the fastest pace in two years.

No clear direction for OPEC from central banks

Commenting on the decision to extend restrictions, the Saudi energy minister noted that the group wants to see firm rate cuts in place before it can start to ease out of supply restrictions, noting that so far central banks have been “flip flopping” on their messaging. The sell off in crude has seen the market trading back down to test support at the 77.64 level. This is a key support zone to watch and a break here will be firmly bearish for crude, opening the way for a test of 72.61 next. To the topside, 82.59 remains the key objective for bulls.

Recently, investors have been sceptical about the strength of demand in the two main engines of the global economy: the US and China. At the same time, however, the OPEC+ cartel has been maintaining voluntary production cuts, leading to an artificially balanced market or even a slight deficit, which sustains relatively high oil prices.

Projected oil demand also plays a crucial role in OPEC+’s strategy. The organization expects a demand of 43.65 million barrels per day (bpd) in the second half of 2024. This figure is significantly higher than the International Energy Agency’s (IEA) projection, which estimates a demand of 41.9 million bpd. This discrepancy in projections underscores the uncertainties and challenges OPEC+ faces in anticipating market behaviour.

What is driving the oil price at the moment?

It turns out, though, that the OPEC+ decision regarding the future of the voluntary cuts agreement is not as important as geopolitics. It was the latest escalation in the Middle East that led to a significant rebound in oil prices.

The global oil environment is influenced by several factors, including the boom in US production. The increasing shale oil production has changed market dynamics, providing significant competition for traditional OPEC+ producers. This competition has forced OPEC+ to be more strategic in its production decisions to maintain relevance and stabilize its members’ revenues.


Despite the production cuts, current oil prices are insufficient to balance the budgets of many OPEC+ members. This poses a significant challenge for countries relying heavily on oil revenues to fund their economies. The extension of production cuts until 2025 directly responds to this need to maintain higher prices and provide greater economic predictability in the long term.

OPEC+ also needs to manage market perception and investor confidence. The decision to extend production cuts signals that the organization is committed to market stability. However, it must also be careful not to restrict supply too much, which could lead to excessive price increases and potentially incentivize more competition from non-OPEC+ producers.

OPEC+’s decision to extend its production cuts until 2025 is a strategic measure to stabilize the oil market amid weak demand and growing competition. The organization faces the challenge of balancing supply and demand, managing prices to maintain its members’ economic viability, and adapting to an ever-changing competitive environment. Through these prolonged cuts, OPEC+ seeks to ensure its influence in the global oil market and provide greater stability to its members.

Don’t forget about the Middle East political picture

Conflict between Israel and Hamas in Gaza Strip was not front-page news for the past few weeks. On the other hand, the helicopter crash with the Iranian president on board has refocused journalists’ attention on the Middle East region. The death of the Iranian president and the foreign minister led OPEC+ to postpone a ministerial-level meeting by one day to June 2.

However, this is not the end of the increased geopolitical tension in the Middle East. Israel bombed a refugee camp in Rafah, sparking international condemnation and calls for an end to military actions in the Gaza Strip. Moreover, there have been two attacks on tankers in the Red Sea by Yemeni Houthis, which reminded traders about the threat of disruption of the world’s most crucial raw material supply. It would not take much to reverse oil prices, especially if Iran takes further action against Israel or Gulf area tanker traffic.

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This article does not constitute investment advice. Make sure you do your own research or consult a professional advisor.

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