OPEC+ Delays Planned Oil Production Increases Amid Weak Demand and Price Pressures
The OPEC+ alliance, comprising oil-exporting countries led by Saudi Arabia and Russia, has decided to postpone planned increases in oil production initially set for January 2025.
The group made the decision during an online meeting Thursday, citing weaker-than-expected global demand and rising competition from non-OPEC+ producers. The production adjustments are now scheduled to begin on April 1, 2025, and will be phased in gradually over 18 months until October 2026.
The plan to restore 2.2 million barrels per day was originally intended to address a gradual rebound in global demand. However, with crude prices stagnating around $70 per barrel for weeks—well below highs seen earlier in the year—OPEC+ opted to hold back on production to prevent further market oversupply.
Key factors contributing to the decision include slower-than-anticipated demand recovery in China and increased oil output from countries such as Brazil and Argentina, which are not part of the OPEC+ alliance.
For OPEC+ members, oil revenues remain crucial. Saudi Arabia relies on oil income to fund Vision 2030 projects, including the development of the $500 billion Neom city. Similarly, Russia depends on oil exports to support its economy and fund its war in Ukraine.
Despite these pressures, the alliance is cautious about ramping up production too quickly, which could flood the market and drive prices lower. Analysts at Standard Chartered estimate that the new schedule will result in 800,000 fewer barrels per day being produced in 2025 compared to prior projections.
The postponement comes as oil prices hover at $68.75 per barrel for West Texas Intermediate (WTI) and $72.57 for Brent crude, both down significantly from mid-year peaks. For US consumers, these lower prices have translated into relief at the gas pump, with average gasoline prices falling to $3.03 per gallon, the lowest since May 2021. Thirty-one states now report averages below $3 per gallon, offering significant savings to motorists.
However, this trend may not persist if OPEC+ production cuts succeed in tightening the market and pushing prices higher in the coming months.
Global demand forecasts for 2025 vary. OPEC recently revised its growth outlook downward to 1.54 million barrels per day, a figure still higher than projections from the International Energy Agency and other analysts. With uncertainty surrounding demand recovery and geopolitical factors, OPEC+ appears to be taking a conservative approach.
“This is a watch-and-wait strategy,” said Helima Croft of RBC Capital Markets.
She added that OPEC+ will reassess the situation in the spring before making further adjustments.
With input from the Associated Press and the Financial Times.
