OPEC and its partners, commonly known as OPEC+, have come to an agreement to extend and deepen the production limits that began in 2017.
Under the new deal hammered out during OPEC’s biannual meeting in Vienna, energy ministers from participating oil-producing countries agreed to deepen the production cuts by an additional half a million barrels per day (bpd), more than the 400,000 bpd that had been previously expected.
In addition, Saudi Arabia, which is keen to support oil prices ahead of the IPO for state-owned Saudi Aramco, has committed to voluntarily cutting its own output by a further 400,000 bpd. This essentially takes the production cuts from the current 1.2 million bpd to 2.1 million bpd.
While the initial OPEC-led deal helped restore some stability to oil markets, the seemingly unstoppable growth in US crude oil production has compensated for this. This has been largely driven by shale operators like BP and ExxonMobil—the energy giants behind the Castrol and Mobil lubricant brands, respectively—consistently raising production.
Oil prices rose in response to the announcement, but they remained significantly below their peak from April this year, indicating the markets see little chance of shortages. The new cuts will apply through to March next year, when their effects will be assessed at an extraordinary meeting on March 5-6.
Prince Abdulaziz bin Salman, the Saudi Energy Minister, pointed out at a press conference that the intended 2.1 million bpd production cut will only be achievable with better compliance among OPEC+ nations.