OPEC+ oil production delays reality check as group demands it, Saudi Arabia says

OPEC+'s 'precautionary' decision to delay crude production increases until after the first quarter gives the group time to assess developments in global demand, European growth and the US economy , according to the chairman of the coalition, Saudi Energy Minister Abdulaziz bin Salman.

On Thursday, the alliance of oil producers agreed to extend several production cutswith the timetable to begin phasing out a voluntary cut of 2.2 million barrels per day undertaken by a subset of OPEC+ members being pushed back three months to April.

Several members of the group are carrying out a second voluntary production cut, while the coalition as a whole is also restricting production as part of its formal policy – ​​both are now expected to extend until December 31, 2026, rather than until 'at the end of 2025 initially planned.

Speaking to CNBC's Dan Murphy on Friday, Saudi Arabia's energy minister said OPEC+ needs to undertake a “reality check” and reconcile supply and demand signals with market sentiment and take care of “the fundamentals, while putting in place something that alleviates these negative feelings within, of course, the contours of what OPEC+ can do. »

Barclays analysts partly echoed the minister's sentiments, saying the alliance was “maintaining a cautious stance” and suggesting “market share concerns among members are likely overblown”.

OPEC+ faces a range of variables affecting the supply and demand situation and geopolitical uncertainties, from economic growth amid falling inflation to conflict in the oil-rich Middle East region. -East and the January return to the White House of President-elect Donald Trump – a long time. champion of the American oil industry, who applied protectionist tariffs to China and sanctioned Iran for its nuclear program during his first presidential term.

“There are so many other things, you know, growth in China, what's happening in Europe, growth in Europe… what's happening in the American economy, like interest rates, l “inflation,” the Saudi Energy Minister said on Friday.

“But honestly, the main cause of these ballots being moved or moved is [supply-demand] fundamental. It is not a good idea to bring in volumes in the first quarter. »

The first quarter is generally marked by a build-up of inventories due to a drop in demand for transportation fuels.

In a note on Friday, HSBC analysts estimated that Thursday's OPEC+ agreement is “marginally supportive” of supply-demand balances, reducing the forecast market surplus in 2025 to just 0.2 million barrels per day, if the alliance of oil producers continues to increase production. in April.

“A further delay, which we do not rule out, would leave the market broadly balanced next year,” they said. “While OPEC+’s decision to abstain strengthens short-term fundamentals, it could be seen as an implicit admission that demand is sluggish.”

Demand has been at the forefront of OPEC+ considerations, with OPEC's November monthly oil market report showing annual growth of 1.54 million barrels per day in 2025.

The Paris-based International Energy Agency forecast last month that global oil demand would increase by 920,000 barrels per day this year and by just under a million barrels per day in 2025.

Market concerns particularly persisted over the outlook for the world's largest crude importer, China, whose recovering economy has received a government boost in recent months through stimulus measures.

Abdulaziz bin Salman said OPEC+ had “not necessarily” lost confidence in the global appetite for crude or the recovery in China, but admitted that “what is not helpful is the fact that some [OPEC+] countries were not properly meeting their commitments.

OPEC+ has increasingly repressed members' compliance with individual quotas – which have in the past included countries like Iraq, Kazakhstan and Russia – and requires overproducers to compensate for excess barrels with additional reductions. The deadline for these compensations is now set for the end of June 2026.

Oil prices fell despite the triple extension of production increases, with the Ice Brent contract expiring in February trading at $71.40 a barrel at 2:46 p.m. London time, down 0.96% from the closing on Thursday. Nymex WTI futures for the first month of January fell to $67.63 per barrel, down 0.98% from the previous day's settlement price.

“While prices are expected to remain volatile in the near term, we expect inventory to fall this year and the market to be closely balanced next year, in contrast to market expectations of a heavily oversupplied market, which should support prices over the coming months,” said Giovanni, a strategist at UBS. Staunovo said in a Friday note.