OPEC+ considers further oil cut extensions to bolster market

OPEC+ is debating the prolongation of its voluntary oil output reductions into the second quarter of 2023, as shared by three OPEC+ insiders. This strategy seeks to further stabilize the oil market, with some discussions even suggesting an extension through the year's end, according to two of the sources.

Back in November 2022, the alliance committed to a voluntary reduction of roughly 2.2 million barrels per day (bpd) for this year's initial quarter, spearheaded by Saudi Arabia's continued cut. While geopolitical tensions, especially attacks by the Houthi group, have propped up oil prices, economic slowdown fears and rising interest rates have applied downward pressure.

The likelihood of extending these cuts into the next quarter is high, as per an OPEC+ informant, with a potential year-long extension on the table. Requests for comments from OPEC and the Saudi Energy Ministry went unanswered.

According to the existing pact, the group's total reductions are set to decrease by 3.66 million bpd starting April. Saudi Arabia, OPEC+'s unofficial leader, has hinted at the possibility of sustaining the cuts beyond the initial quarter, though official discussions within OPEC+ remain pending. A formal decision is anticipated in early March, with each member country expected to announce its stance.

The contemplation of extending oil output cuts reflects OPEC+'s dedication to market stability and support. This maneuver aims to mitigate economic and interest rate concerns impacting oil prices. The outcome of this decision on the global oil supply, market balance, and crude oil prices is yet to unfold.