Extending OPEC Plus production cuts raises oil prices economy

Crude oil prices rose slightly in trading today, Thursday, after OPEC Plus decided to postpone the increase in production until April 2025 and postpone the complete cancellation of the cuts for a year until the end of 2026.

Brent crude futures rose 40 cents, or 0.55%, to $72.71 per barrel, while US West Texas Intermediate crude futures rose 40 cents, or 0.58%, to $68.94 per barrel.

OPEC Plus, which includes member states of the Organization of the Petroleum Exporting Countries (OPEC) and allies such as Russia, was planning to start reducing production cuts since October 2024, but the slowdown in global demand and the rise in production from outside the group are among the factors that forced it to postpone those plans. More than once.

surplus

“This will not lead to a supply shortage over the next year and an oversupply is still expected,” said Tamas Varga, of oil futures brokerage BVM.

The gradual cancellation of the 2.2 million barrels per day reduction will begin in April 2025, with monthly increments of 138 thousand barrels per day, and will continue for 18 months until September 2026.

In the United States, a larger-than-expected decline in US crude inventories last week provided some support for prices.

Influencing factors

Factors that have put pressure on oil prices recently include weaker-than-expected demand from China, in addition to increased production from countries such as Brazil and Argentina that are not members of OPEC Plus.

OPEC recently reduced its demand growth expectations in 2025 to 1.54 million barrels per day, from 1.85 million barrels per day it had expected last July. This is the highest estimate compared to the International Energy Agency’s estimate of 990 thousand barrels per day, the US Energy Information Administration at 1.22 million, and the Rystad Energy Information Company at 1.1 million.

Analysts at Commerzbank expect Brent prices to average $75 per barrel in the first quarter of next year and $80 for the remaining three quarters.

In the United States, Donald Trump’s return to the White House will likely lead to increased fossil fuel production. Not only has the president-elect campaigned on more drilling, but his nominee for Treasury Secretary, Scott Besent, has developed an economic plan aimed at increasing domestic oil production by the equivalent of 3 million barrels per day.

Picent pointed out that additional oil production would reduce inflationary pressures on American consumers. But Trump’s team has not fully explained why oil producers are increasing supplies and cutting prices to levels that could hurt their profits.