OPEC+ Delays Oil Output Revival: Weighing Global Demand and Non-OPEC Supply
Thursday, Dec 5, 2024 4:55 am ET
The Organization of the Petroleum Exporting Countries and its allies (OPEC+) have announced a further delay to their oil output revival, scheduling the restart for the first quarter of 2025. This decision comes amidst a complex interplay of global demand dynamics, increased supply from non-OPEC countries, and geopolitical tensions.
OPEC+ has been grappling with the challenges posed by a slowdown in global demand, particularly in China, and swelling supply from non-OPEC nations. Despite plans to increase production by 2.2 million barrels per day (bpd) in monthly increments, the group has twice delayed the restart due to faltering demand growth. The new target, now set for the first quarter of 2025, means OPEC+ will maintain its supply cuts for longer, aiming to keep prices favorable for producers.

The United Arab Emirates (UAE), which has been expanding its oil production capacity, also negotiated an oil output hike of 300,000 bpd during 2025. While Emirati officials claim this increase is ring-fenced from negotiations, OPEC+ sources suggest it may be up for debate. The UAE's planned production surge, along with Brazil's pre-salt fields and U.S. shale production, is further exacerbating the challenge for OPEC+.
This delay, the second in a row, suggests a cautious approach by OPEC+ members, who are grappling with a slowdown in global demand growth and rising output from countries outside the group. The increased production from non-OPEC+ nations, particularly in the Americas, and the slow recovery in demand, especially in China, are putting downward pressure on oil prices. Despite Brent crude mostly staying in the $70-$80 per barrel range this year, the combination of these factors underscores the challenges OPEC+ faces in keeping world markets in balance.
OPEC+ members could employ several strategies to ensure compliance with production cuts and mitigate economic impact. They could incentivize compliance by offering rewards, such as higher future production quotas, to countries that adhere to their commitments. Additionally, they could deploy advanced monitoring technologies to track production and export volumes, making it harder for countries to cheat on their quotas. Lastly, they could diversify their economies to reduce reliance on oil, promoting investments in renewable energy, manufacturing, and other sectors.
In conclusion, the OPEC+ delay in restarting its oil production hike, initially set for January 2025, reflects the group's response to a complex global landscape. As OPEC+ members navigate the challenges of slowing demand growth and increased supply from non-OPEC countries, they must remain adaptable and strategic in their approach to maintain competitive advantage in the global oil market.