OPEC+ producers have agreed to voluntary oil output cuts for the first quarter next year in an attempt to boost the market, but crude prices fell after the move.
Saudi Arabia, Russia and other members of OPEC+, who pump more than 40 percent of the world’s oil, met online on Thursday and issued a statement summarising countries’ voluntary cut announcements.
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OPEC+ also invited Brazil to become a member of the group. The country’s energy minister said it hoped to join in January.
Oil prices fell after rising by more than 1 percent earlier in the session after OPEC+ producers agreed to the cuts. Benchmark Brent crude for February futures were over 2 percent lower at just under $81 a barrel at 18:36 GMT.
The group met to discuss 2024 output amid forecasts the market faces a potential surplus and as a 1 million barrel per day (bpd) voluntary cut by Saudi Arabia was set to end next month.
The total curbs amount to 2.2 million bpd from eight producers, OPEC said in a statement. Included in this figure, is an extension of the Saudi and Russian voluntary cuts of 1.3 million bpd.
The 900,000 bpd of additional cuts pledged on Thursday includes 200,000 bpd of fuel export reductions from Russia, with the rest divided among six members.
Russian Deputy Prime Minister Alexander Novak said Russia’s voluntary cut would include crude and products.The UAE said it had agreed to cut output by 163,000 bpd while Iraq said it would cut an extra 220,000 bpd in the first quarter.
Saudi Arabia, Russia, the UAE, Iraq, Kuwait, Kazakhstan and Algeria were among producers who said cuts will be unwound gradually after the first quarter, market conditions permitting.
The Saudis have to earn nearly $86 per barrel to meet their planned spending goals, according to the latest estimate from the International Monetary Fund.
Riyadh is trying to fund an ambitious overhaul of the kingdom’s economy, reduce its dependence on oil and create jobs for a young population
While consumers in countries such as the United States have welcomed falling oil prices amid struggles with inflation, oil-producing countries who rely heavily on revenue from the energy sector have sought to arrest that downward momentum.
Reaching a consensus among OPEC+ members, however, has not been easy because they are faced with questions of how production cuts should be split among the group’s 23 member countries.
OPEC+ is expected to convene again in June, and Brazil, one of the world’s 10 largest producers, could be among them.
Mines and Energy Minister Alexandre Silveira said Brazil is eager to join the group although the nature of Brazil’s participation was not immediately clear.
“Considering that Brazil is a large oil producer and is driving oil production growth, it is important to have them on board, but it seems that they are not cutting production like Mexico, so [I] would conclude with: good for OPEC+, less relevant for oil market balances,” UBS analyst Giovanni Staunovo told the Agence France-Presse news agency.