Saudi Energy Minister Calls OPEC+ Decision to Delay Output Cuts a 'Precautionary' Step
Saudi Energy Minister Calls OPEC+ Decision to Delay Output Cuts a ‘Precautionary’ Step
Saudi Energy Minister Abdulaziz bin Salman said that OPEC+ decided to postpone increasing oil production until after the first quarter of next year as a careful and cautious step.
OPEC+ Decision
OPEC+ has decided to give itself more time to observe important global economic trends, a representative told CNBC.
Salman explained that the group wants to reassess the balance between oil supply and demand and how it aligns with market expectations. He highlighted the importance of managing these factors within OPEC+’s abilities.
On Thursday, OPEC+ announced it would delay its planned increase in oil production by three months, moving it from next month to April 2025. Additionally, the group extended the timeline for fully reversing previous production cuts by another year, now set for the end of 2026.
When asked about the potential impact of U.S. President-elect Donald Trump’s administration on their strategy, Salman said the decision to delay production was due to the first quarter of the year typically being a time when oil stocks build up, making it an unsuitable period to add more supply.
He also emphasized the importance of understanding global economic patterns, noting that the decision to postpone production was based on fundamental market factors.
Careful Approach
Analysts at the British bank Barclays agreed in part with Salman, saying OPEC+ took a “careful approach” by delaying its plan to increase oil production. They also downplayed concerns about member nations losing market share, calling these fears overblown.
OPEC+, responsible for producing nearly half of the world’s oil, had initially planned to start easing production cuts in October 2024. However, the group has postponed these plans multiple times due to changing market conditions, including slower-than-expected economic growth in China, Europe, and parts of the US, as well as rising oil production from non-OPEC+ countries.
Salman expressed optimism, saying the oil market next year will likely perform better than current forecasts suggest.
Big number
OPEC+ countries are holding back 6 million barrels of oil per day. This includes 2.2 million barrels per day that they might add back to the market. Eight members of OPEC+ have decided to keep their extra cuts of 2.2 million barrels per day in place until the first quarter of 2025.
Published: 7th December 2024
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