The Organization of Petroleum Exporting Countries (OPEC) and its allies, including Russia, collectively known as OPEC+, have announced their decision to extend voluntary production cuts into the second quarter.
This decision, as reported by Saudi Arabia's official press agency on Sunday, aligns with expectations and underscores the group's cautious stance towards replenishing the market amidst uncertain demand forecasts.
According to a source from the Saudi Energy Ministry, Saudi Arabia has committed to prolonging its voluntary reduction of 1 million barrels per day, initiated in July 2023, through to the end of the second quarter.
This reduction is in coordination with other OPEC+ member countries. Furthermore, this cut is on top of an earlier announced reduction by Saudi Arabia of 500,000 barrels a day, which is to continue until the year's end.
Analysts, including Giacomo Romeo from Jefferies, viewed the announcement as anticipated yet indicative of OPEC+'s unified approach to cautiously managing supply levels.
Romeo suggests that any adjustments to supply will likely be gradual, possibly commencing in the third quarter as demand traditionally increases. However, the future beyond the second quarter remains uncertain, with the next OPEC+ meeting in early June expected to provide further clarity.
This decision extends the production cuts initiated by OPEC+ in late November. While oil prices have risen since then, they have not reached the peak levels of fall 2023. The ongoing conflict between Israel and Hamas, despite its potential to impact Middle Eastern oil supplies, has not significantly influenced crude oil prices towards reaching those peak levels.