OPEC+ struggles to maintain market power

Company News

by Glenn Dyer

OPEC+ may have agreed on Sunday to extend a voluntary production cut of 2.2 million barrels of crude oil a day deep into next year, but that is an acknowledgment that the output restrictions have failed to support prices at a level its members want.

No matter how the group pitches the decision, it is another sign of weakening market power and a pro-Russian and Saudi bias. Both countries have pressing revenue needs and need to keep prices around or above $US80 a barrel.

Despite the OPEC+ caps, equivalent to about 5.7% of global crude supply, and ongoing tensions in the Middle East, global oil prices have fallen by about 10% since hitting a five-month high in early April.

Brent crude prices - the global oil benchmark - ended May at $US82 a barrel on Friday, down from $US91 in early April when a suspected Israeli attack on Iran’s embassy in Syria shook oil markets.

The price of West Texas Intermediate crude, the US marker, has dropped from nearly $US87 per barrel to $US78.

OPEC+ has been powerless to stop this slide.

The cuts, first agreed upon in December, were due to expire at the end of this month. They came on top of previously agreed reductions of 3.66 million barrels per day announced in 2022 and 2023 as the group — led by Saudi Arabia and Russia — tried to counter slowing demand and rising output from the United States.

The group also released its 2025 production requirements for member and non-member countries, which were essentially the same as this year’s.

The United Arab Emirates’ production quota increased by 300,000 barrels per day. The rise “will be phased in gradually” from January through September 2025, OPEC+ said in Sunday’s statement, effectively yielding to demands from the UAE for higher, not lower, quotas, as suggested a week ago.

Sluggish demand from China hasn’t helped - imports fell 10.6% in April when forecasts were for a rise. January-April imports were up 4.6% from the same period in 2023 (when Chinese demand was recovering from the impact of the harsh lockdowns in 2022).

Glenn Dyer

Glenn Dyer has been a finance journalist and TV producer for more than 40 years. He has worked at Maxwell Newton Publications, Queensland Newspapers, AAP, The Australian Financial Review, The Nine Network and Crikey.

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