OPEC+ cartel begins voluntarily reducing oil output by 2.2 mln bpd until end of 1Q 2024

Several OPEC+ countries, including Saudi Arabia and Russia, have begun voluntarily reducing their oil production by an aggregate additional volume of 2.2 mln barrels per day (bpd) in January. The policy will be in force throughout the first quarter and, depending on market conditions, the petroleum producers’ cartel may begin progressively returning reduced volumes to the market.

Following the November 30 OPEC+ summit, the member countries of the cartel decided on additional voluntary cuts in oil output to achieve a balance in the market. Thus, Saudi Arabia will reduce output by 1 mln bpd until the end of March 2024, while Russia will deepen its reduction in oil deliveries to world markets from 300,000 bpd to 500,000 bpd. Other OPEC+ nations will lower output by a total of nearly 700,000 bpd, including Iraq (by 223,000 bpd), the United Arab Emirates (UAE) (by 163,000 bpd), Kuwait (by 135,000 bpd), Kazakhstan (by 82,000 bpd), Algeria (by 51,000 bpd) and Oman (by 42,000 bpd). These cuts are not part of the OPEC+ agreement and remain optional.

Given that Saudi Arabia is extending production cuts already in effect since July 2023 and is not deepening them, and that Russia is cutting its already reduced supply volumes by another 200,000 bpd, the volume of new cuts for the market will reach only 896,000 bpd.

In addition to fresh cuts, a number of OPEC+ members will continue to honor their agreements to reduce output by 1.66 mln bpd by the end of 2024. This measure has been in effect since May 2023. Under the relevant agreement, Saudi Arabia is voluntarily reducing production by 500,000 bpd, Russia by 500,000 bpd, Iraq by 211,000 bpd, the UAE by 144,000 bpd, Kuwait by 128,000 bpd, Kazakhstan by 78,000 bpd, Algeria by 48,000 bpd, Oman by 40,000 bpd, and Gabon by 8,000 bpd, according to the assumed reduction obligations.

Thus, the overall volume of voluntary reductions in oil production by OPEC+ countries will be 3.86 mln bpd until the end of the first quarter of 2024.

At the same time, as part of the OPEC+ agreement, revised oil production quotas will go into effect in 2024. For example, Russia's authorized production level was decreased from 10.478 mln bpd to 9.949 mln bpd, and Azerbaijan's quota was reduced from 684,000 bpd to 551,000 bpd, while the UAE's quota went up from 3.019 mln bpd to 3.219 mln bpd. According to TASS calculations, the OPEC+ countries' oil output limits will be lowered by 1.321 mln bpd beginning in 2024, to 40.535 mln bpd.