Oil prices saw a slight increase on Monday due to an agreement by OPEC+ to continue with their voluntary output cuts until the second quarter to stabilize the crude markets. The global benchmark Brent increased by 0.38% to $83.87 per barrel, while U.S. West Texas Intermediate futures rose by 0.34% to $80.24 per barrel.
OPEC+ announced on Sunday that their planned 2.2 million barrels per day output cuts for the first quarter will continue into the next quarter. According to the state-owned Saudi Press Agency, the leading member of OPEC+, Saudi Arabia, has stated that they will maintain their voluntary cut of 1 million barrels per day until the end of the second quarter. Saudi Arabia’s crude production will remain around 9 million barrels per day until the end of June.
This decision by OPEC+ may indicate a less positive outlook for demand in the second quarter compared to their initial assessment. RYSTAD ENERGY’S Senior Vice President, Jorge Leon, believes this move by OPEC+ demonstrates their strong unity, which was questioned in November when Angola left the group.
Leon also suggests that this extension shows a determination to keep oil prices above $80 per barrel in the second quarter, and if the cuts were to be suddenly lifted, prices could drop to $77 per barrel in May.
Other key producers, such as Russia, Iraq, and UAE, have also agreed to extend their voluntary production cuts until the end of the second quarter. These cuts are 471,000 barrels per day for Russia and 220,000 for Iraq and UAE respectively. Despite OPEC+ cuts, ongoing conflicts, and risks in the region, oil prices have remained within a tight range of $75 to $85 per barrel over the past six months.
