OPEC Agrees To Reduce Output Cuts From October

Oil prices rose through the first part of the week but declined through to week end to finish lower on China demand concerns and strong non-OPEC supply. They have started today lower after OPEC announced that output would gradually be returned to the market over 12 months starting in Q4 this year. Current production cuts will be extended into Q3. The USD fell 0.1%.

• The cuts are still being extended into 2025 but will be reduced over time. The October start though was earlier than many expected. The agreement seems a compromise as Saudi Arabia has wanted higher prices to fund its economic plans while other producers have wanted to pump more. Saudi energy Minister Abdulaziz bin Salman said that the group can change its stance if needed.
• The current agreed output curbs are 2mbd. Bloomberg estimates that by January there will be an additional 750kbd from the 8 producers who made “voluntary” reductions. Compliance with agreed cuts remains patchy.
• OPEC is reviewing members’ capacity capabilities and then will reset production levels. The completion of this process has been delayed a year to end 2026.
• UAE’s 2025 quota was increased 300kbd.
• On Friday WTI fell 0.9% to $77.18/bbl after a high of $78.62. It has started today down 0.3% to $76.74. Brent was 0.6% lower at $81.37/bbl following a high of $82.69.