At its latest meeting, the OPEC+ group has agreed to extend its current production cuts, but oil prices slipped slightly following the news.
The OPEC+ group, which combines OPEC members with non-member oil producers like Russia and Mexico, is currently withholding about 5.86 million barrels per day (bpd) in crude oil production.
About 2.2 million bpd of these are voluntary cuts, which participating countries have made beyond their obligations under the OPEC+ deal.
While OPEC+ has made an agreement to extend the 3.66 million bpd of compulsory cuts until the end of next year, the voluntary cuts may start unwinding in October, although this may be determined by the condition that OPEC wants to see suitable market conditions first.
Combined with the UAE having its production baseline raised by 300,000 bpd, the market seems to have come to the conclusion that the markets may not be as tight as previously expected. Analysts at Goldman Sachs wrote:
“The communication of a surprisingly detailed default plan to unwind extra cuts makes it harder to maintain low production if the market turns out softer than bullish OPEC expectations. The communication of a gradual unwind reflects a strong desire to bring back production of several members given high spare capacity.”
While OPEC+ decisions don’t cover non-members like Guyana—where ExxonMobil, the maker of the Mobil SHC gear oil, is ramping up its production—they generally have enough of an effect to influence oil prices. The organisation scheduled its next meeting for December 1.
