Delegates from the OPEC+ producer group told Reuters on Monday that the group is expected to stick to its current plans for a gradual output increase starting in April.
The decision is anticipated despite US President Donald Trump’s calls for OPEC to lower prices, and will be finalised when a panel of top ministers convenes on Monday.
The Organization of the Petroleum Exporting Countries and allies are scheduled to increase production of oil from April by unwinding some of the 2.2 million barrels per day of voluntary output cuts.
The voluntary output cuts were in place from early 2024, with eight members of OPEC+, including Saudi Arabia and Russia, adhering to these cuts.
OPEC to maintain current plan
The Joint Ministerial Monitoring Committee (JMMC) is unlikely to recommend an output increase for OPEC+ beyond what is already planned, according to four OPEC+ sources quoted by Reuters in a report.
Oil prices were given some support on Monday after financial markets were roiled by Trump’s announcement of sweeping tariffs on Mexico, Canada, and China, America’s top trading partners.
“The JMMC could point out that the voluntary cuts by the eight producing countries, totalling 2.2 million barrels per day, will be phased out anyway from April and that production will therefore rise. In this way, OPEC could “cleverly” extricate itself from the affair,” Barbara Lambrecht, commodity analyst at Commerzbank AG, said.
Lambrecht added:
In any case, OPEC+ is increasingly faced with the problem that individual countries have increased their production capacity and are likely to push for an increase in quotas.
Supply disruptions led to a jump in oil prices
Concerns surrounding the potential disruptions to the oil supply chain caused by US sanctions imposed on Russia escalated tensions within the global oil market, driving the price of oil to a peak of $83 per barrel on January 15.
This surge marked the highest price point reached since August. Subsequently, oil prices experienced a moderate decline, falling below $77 per barrel.
However, an upswing in prices was observed on Monday, as the implementation of tariffs triggered renewed apprehensions regarding potential disruptions to the supply of oil.
On top of the voluntary production cuts mentioned above, OPEC+ is adhering to another 3.65 million barrels per day of crude oil output cuts.
This brings the total cut by the whole group to around 5.85 million barrels per day, or nearly 6% of world supply.
Enough spare capacity
OPEC+ has repeatedly delayed its plan to increase output due to weak demand and rising non-OPEC supply last year.
In December, the group extended its production cuts through the first quarter of 2025, pushing back its plan to raise output until April.
Based on OPEC’s plan, the unwinding of the voluntary output cuts from April could add more barrels to the market at a time when demand has remained subdued from China.
Though the recent US sanctions on Russia’s shadow fleet have led to shortages in countries such as China and India, OPEC has enough spare oil production spare capacity to take care of any void.
These production increases by OPEC will continue until September 2026.
The post OPEC+ likely to continue gradual output increase strategy appeared first on Invezz
