OPEC+ is expected to extend its production cuts rather than increase output in the upcoming December meeting, according to analysts at UBS. This decision is influenced by current market conditions, with oil prices lingering near the lower end of their trading range.
The coalition is cautious about the potential for a seasonal surplus in the oil market, which could further depress prices if production is ramped up prematurely. UBS analysts predict that OPEC+ will extend its production cut policy for an additional three months into the first quarter of 2025, providing flexibility to adjust production in response to unexpected market disruptions or stronger-than-expected demand later in the year.
The ongoing efforts by Iraq, Kazakhstan, and Russia to manage overproduction are also seen as critical to supporting this cautious approach. The consensus among analysts is that OPEC+ will prioritize market stability over output increases, as they have historically done.
UBS forecasts that Brent crude prices will hover around $75 per barrel for the remainder of 2024, reflecting the alliance's recognition of a finely balanced oil market. The careful management of production levels is seen as essential to maintaining price stability.
OPEC+ is closely monitoring the dynamics of non-OPEC+ supply growth, which is expected to rise in the coming years. This increase, coupled with a slowdown in demand growth, could lead to a significant surplus in the oil market, prompting OPEC+ to remain vigilant in its production strategies.
The decisions made by OPEC+ will have implications for oil prices and the global economy, as they navigate the complexities of the oil market. Overall, OPEC+'s cautious stance reflects the delicate balance they must maintain in a rapidly changing market, with the goal of sustaining market stability and manageable oil prices.