OPEC+ strikes back: A bold move to steer the oil market in 2024

The OPEC+ group, spearheaded by Russia’s Deputy Prime Minister Alexander Novak, is set to intensify oil production cuts in early 2024 to stabilize the market and deter speculation.

Novak, in his conversation with the Russian news agency TASS, stated:

“The timely actions of OPEC+, thanks to which about 2.2 million barrels per day will be held off the market in the first quarter of next year, will allow the period of low demand to pass painlessly in the first quarter of 2024.” He further added that if current measures are insufficient, OPEC+ countries are prepared to take additional steps to mitigate market volatility and speculation.

OPEC+ recently announced a reduction of 2.2 million barrels per day (bpd) for the first quarter of 2024, including Saudi Arabia’s ongoing voluntary cut, Russia’s increased reduction in crude and fuel exports by 200,000 bpd, and other members’ voluntary production decreases.

Despite these announcements, the market’s response remained muted, reflecting doubts about OPEC+’s unity in terms of production cuts. This skepticism was heightened by the lack of a unanimous decision on group-wide production reduction.

Analysts opine that while the OPEC+ decision might offset the expected early 2024 deficit, it leaves future strategy questions unanswered. Echoing Novak’s sentiments, Saudi Arabia’s Energy Minister Prince Abdulaziz bin Salman told Bloomberg that the cuts could extend beyond March 2024 if needed, criticizing the market’s misinterpretation of the deal. He expressed confidence that the planned 2.2 million bpd reduction would counter the usual inventory increase in the first quarter.