OPEC+ nations have begun preparations to increase their oil production. They intend to cut production by an average of 1 million barrels per day over the next few months, April through June. This ruling is a major realignment and as the collective looks toward building a more advanced approach, July production will be judged. At one point during the assessment, one of our delegates speculated that we could be looking at another bump in production in the near future. That would amount to a possible 411,000 barrels per day.
The OPEC+ alliance of oil-producing countries had already cut production by 2.2 mbpd last fall. This voluntary decline goes through the end of March. Through recent months, that decline has begun to turn around. This change marks an important strategic shift toward being best positioned for rapidly evolving market demands. To this end, the alliance aims to assess the sustainable production capacity of each member country to set baselines for 2027.
UAE Energy Minister Suhail Mohamed al-Mazrouei made a point to emphasize the need for cooperation beyond the OPEC+ group. He added that the coalition’s efforts alone will not do enough. He pointed out that while OPEC+ is doing its best, external support is essential to navigate the complexities of the oil market.
“This group is doing its best, but it’s not enough only this group, we need the help of others.” – UAE Energy Minister Suhail Mohamed al-Mazrouei
Al-Mazrouei’s other key point was the need to stay attuned to a shifting demand landscape. He pointed out that we have incredible demand and we’re going to exceed that demand if we’re not investment overtaking that demand.
Usually, as we enter into summer, oil demand goes up. This jump is fueled by increased travel and the additional crude required to generate electricity, particularly for air conditioning in many states across the Middle East. Giovanni Staunovo, analyst with UBS, shared his thoughts on the ongoing market disruption. For oil, he noted that the market is “very much closely balanced” in fact Q1 of this year.
“We expect further demand and supply revisions with more incoming data.” – Giovanni Staunovo
Staunovo expects stronger seasonal demand starting in July. He anticipates more barrels from OPEC+ countries to flow into the market, though enough to keep oil prices eventually stabilizing around $60-$70 per barrel over the next few months.
As of 4:30 p.m. London time, the Ice Brent contract with a July expiry was trading at $65.06 per barrel, reflecting a 1.5% increase from Tuesday’s closing price. At the same time, front-month July Nymex WTI futures were up 1.76% from the prior day’s settlement at $61.96/b.
The stakes for the upcoming OPEC+ meeting — likely to be held in early October — are immense on global oil markets. Member nations are doubling down on decisions made in December to maintain current crude oil production levels. Now the focus shifts to how these decisions will affect supply and pricing, in particular with demand set to increase dramatically.