The OPEC+ cartel has reached an agreement to reduce oil production by an additional 1 million barrels per day (BPD) for the early months of the upcoming year. Concurrently, Saudi Arabia has declared voluntary cuts of a comparable magnitude. This decision is anticipated to potentially elevate oil prices on a global scale.

The announcement came after persistent efforts from Saudi Arabia since July to advocate for additional production cuts. The kingdom urged its OPEC+ allies to decrease oil production due to a more than 10 percent decline in crude prices from their peak in September. This development follows a meeting in June where OPEC+ reached a comprehensive agreement, revising production targets for several member nations.

According to delegates of the OPEC+ group cited by Bloomberg, the final details of the accord, including national production levels, will be individually announced by each country. This departure from the customary OPEC+ communique is notable in the latest developments. Russia, in a voluntary move, has committed to a supply cut of 500,000 barrels per day (bpd) until the conclusion of the first quarter. Deputy Prime Minister Alexander Novak conveyed this decision through an official statement.

Simultaneously, a source from the Saudi Energy Ministry has conveyed to the Saudi Press Agency the kingdom's intention to prolong its voluntary production cut until the conclusion of the first quarter in 2024.

Adding to the consensus, Algeria has committed to the agreement by vowing to decrease January oil production by an additional 50,000 barrels per day (bpd). However, Brazil has formally affirmed its status as the 15th member of the OPEC+ cartel, aligning itself with the existing 14 member countries. Together, these 14 countries, now inclusive of Brazil, constitute approximately 40 percent of global oil production. The nuanced intricacies of this collaborative endeavour to stabilize oil markets underscore the gravity of decisions undertaken by individual nations within the OPEC+ framework.

The announcement coincides with a period marked by a decline in oil prices, reaching nearly $98 per barrel in September. This downturn can be attributed to the sluggish global economy and the increasing supplies outside the OPEC+ quota system. The timing of this announcement underscores the ongoing challenges faced by the oil market, influenced by economic conditions and the dynamics of oil production beyond the purview of the OPEC+ alliance.

Image source: Business Today