The Opec+ alliance of oil-producing countries is to extend its current output curbs until the end of 2025 amid concerns about growing non-Opec+ supply and the impact of high interest rates on global crude demand.
The group decided to "extend the level of overall crude oil production ... starting January 1, 2025, until December 31, 2025", the alliance said.
The cuts come as Brent, the benchmark for two-thirds of the world’s oil, has lost about 10 per cent of its value after hitting a multi-month high of $91 a barrel in April.
The UAE has been given a higher oil production level for 2025. The country will receive a production quota of an additional 300,000 barrels a day to be phased in gradually over the first nine months of the next year, Opec said after a ministerial monitoring committee meeting on Sunday.
There is clearly an unexplained supply from Opec+ of more than 1 million bpd
Mukesh Sahdev,
head of oil trading, Rystad Energy
The Opec+ ministerial meeting will be held every six months and the next meeting will be held on December 1.
The oil producers' group said it has also extended the assessment period by the three independent sources to the end of November 2025, "to be used as guidance for 2026 reference production levels".
Members of the group remain committed to "achieve and sustain a stable oil market, and to provide long-term guidance and transparency for the market" and in line with its approach of "being precautious, proactive, and pre-emptive", the group said.
The Organisation of the Petroleum Exporting Countries and allies led by Russia, together known as Opec+, has made a series of deep output cuts since late 2022.
Opec+ has total production curbs of 5.86 million barrels per day in place, including a reduction of 2 million bpd agreed on in 2022, and voluntary cuts of 1.66 million bpd, announced in April last year and extended to December 2024.
The Opec+ aggregate cuts of 3.66 million bpd that were valid through to the end of 2024, and 2.2 million bpd of voluntary cuts by some members, expiring this month, amounted to about 5.7 per cent of global demand.
The countries which have made voluntary cuts that are deeper than those agreed with the wider group are Algeria, Iraq, Kazakhstan, Kuwait, Oman, Russia, Saudi Arabia and the UAE.
Officials of these countries met in person in the Saudi capital Riyadh to discuss the the extension of the voluntary cuts, the kingdom's Energy Ministry said in a statement carried by Saudi Press Agency on Sunday.
"These countries will extend their additional voluntary cuts of 2.2 million barrels per day, that were announced in November 2023, until the end of September 2024 and then the 2.2 million barrels per day cut will be gradually phased out on a monthly basis until the end of September 2025 to support market stability," the statement said.
"This monthly increase can be paused or reversed subject to market conditions."
While crude prices briefly soared above $90 a barrel in April as conflict in the Middle East threatened regional exports, they have since declined.
Brent traded 0.29 per cent lower at $81.62 a barrel at the market close on Friday. West Texas Intermediate, the gauge that tracks US crude, was down 1.18 per cent at $76.99 a barrel.
Opec expects strong economic growth from emerging economies, particularly China and India, to drive crude demand this year.
The group has maintained an optimistic growth forecast of 2.25 million bpd in its last 11 oil market updates.
In contrast, the US Energy Information Administration (EIA) and the International Energy Agency (IEA) are forecasting lower growth rates, estimating an increase of close to 1 million bpd.
In its latest oil market report, the IEA lowered its oil demand growth forecast for 2024 by 140,000 barrels per day to 1.1 million bpd, citing weak demand in Europe.
“While there is a positive outlook on a demand increase for the next three to four months, crude and condensate supply is concerning,” said Mukesh Sahdev, senior vice president & head of oil trading at Rystad Energy.
The Norway-based consultancy said its analysis indicates that an increase in refinery crude consumption and exports since the Covid-19 pandemic's low levels is higher than the production that is accounted for.
“There is clearly an unexplained supply from Opec+ of [more than] 1 million bpd. The muted oil price reaction to cuts and erosion of backwardation to near contango reflects some unexplained surplus,” Mr Sahdev said in a research note on Friday.
Non-Opec+ supply
Supply from countries outside the Opec+ alliance is set to grow in the range of 1 million bpd to 1.5 million bpd this year, according to estimates from Opec and the IEA.
The US, the world’s largest oil and gas producer, is heading for another year of record production, although with a significantly smaller increase as companies scale back activity following a wave of acquisitions in the industry, analysts have said.
Production from American oilfields reached a record high of 12.9 million bpd last year as companies utilised new technology to counterbalance lower oil prices and reduced rig counts.
Wood Mackenzie has forecast a 270,000-bpd growth in output this year, which is close to the 260,000-bpd increase projected by the EIA, the statistical arm of the Department of Energy.
Meanwhile, Iran, which was the second-largest source of crude supply growth last year after the US, plans to raise its production to 4 million bpd, Iranian media reported this week, without specifying a timeframe.
Last year, the country's production reached 3.4 million bpd, with exports at about 1.5 million bpd.
Interest rate concerns
At the start of 2024, some economists predicted the US Federal Reserve would cut interest rates, driven by concerns about slowing economic growth and potentially rising unemployment.
However, the Fed has maintained a cautious stance due to persistent inflation. While inflation has shown signs of decline from its peak in mid-2022, it has remained above the central bank’s 2 per cent inflation target.
High interest rates can weigh on economic growth, lowering crude demand.
“Inflation readings recorded levels worse than market expectations earlier this year, this has accordingly diminished investors’ hopes for a rate cut this summer, so most market expectations shifted to the possibility of starting to reduce interest rates in late 2024,” said Mohamed Hashad, chief market strategist at Noor Capital.
“Investors and market participants are awaiting a slew of readings of personal consumption expenditures, personal income, and consumer spending in the US."
Fed officials have kept interest rates in the range of 5.25 per cent to 5.5 per cent, a two-decade high, since last July.
Classification of skills
A worker is categorised as skilled by the MOHRE based on nine levels given in the International Standard Classification of Occupations (ISCO) issued by the International Labour Organisation.
A skilled worker would be someone at a professional level (levels 1 – 5) which includes managers, professionals, technicians and associate professionals, clerical support workers, and service and sales workers.
The worker must also have an attested educational certificate higher than secondary or an equivalent certification, and earn a monthly salary of at least Dh4,000.
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THE BIO
Favourite book: ‘Purpose Driven Life’ by Rick Warren
Favourite travel destination: Switzerland
Hobbies: Travelling and following motivational speeches and speakers
Favourite place in UAE: Dubai Museum
Wicked: For Good
Director: Jon M Chu
Starring: Ariana Grande, Cynthia Erivo, Jonathan Bailey, Jeff Goldblum, Michelle Yeoh, Ethan Slater
Rating: 4/5
FFP EXPLAINED
What is Financial Fair Play?
Introduced in 2011 by Uefa, European football’s governing body, it demands that clubs live within their means. Chiefly, spend within their income and not make substantial losses.
What the rules dictate?
The second phase of its implementation limits losses to €30 million (Dh136m) over three seasons. Extra expenditure is permitted for investment in sustainable areas (youth academies, stadium development, etc). Money provided by owners is not viewed as income. Revenue from “related parties” to those owners is assessed by Uefa's “financial control body” to be sure it is a fair value, or in line with market prices.
What are the penalties?
There are a number of punishments, including fines, a loss of prize money or having to reduce squad size for European competition – as happened to PSG in 2014. There is even the threat of a competition ban, which could in theory lead to PSG’s suspension from the Uefa Champions League.
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Various Artists
Habibi Funk: An Eclectic Selection Of Music From The Arab World (Habibi Funk)
Who's who in Yemen conflict
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Yemeni government: Exiled government in Aden led by eight-member Presidential Leadership Council
Southern Transitional Council: Faction in Yemeni government that seeks autonomy for the south
Habrish 'rebels': Tribal-backed forces feuding with STC over control of oil in government territory
Quick pearls of wisdom
Focus on gratitude: And do so deeply, he says. “Think of one to three things a day that you’re grateful for. It needs to be specific, too, don’t just say ‘air.’ Really think about it. If you’re grateful for, say, what your parents have done for you, that will motivate you to do more for the world.”
Know how to fight: Shetty married his wife, Radhi, three years ago (he met her in a meditation class before he went off and became a monk). He says they’ve had to learn to respect each other’s “fighting styles” – he’s a talk it-out-immediately person, while she needs space to think. “When you’re having an argument, remember, it’s not you against each other. It’s both of you against the problem. When you win, they lose. If you’re on a team you have to win together.”
World record transfers
1. Kylian Mbappe - to Real Madrid in 2017/18 - €180 million (Dh770.4m - if a deal goes through)
2. Paul Pogba - to Manchester United in 2016/17 - €105m
3. Gareth Bale - to Real Madrid in 2013/14 - €101m
4. Cristiano Ronaldo - to Real Madrid in 2009/10 - €94m
5. Gonzalo Higuain - to Juventus in 2016/17 - €90m
6. Neymar - to Barcelona in 2013/14 - €88.2m
7. Romelu Lukaku - to Manchester United in 2017/18 - €84.7m
8. Luis Suarez - to Barcelona in 2014/15 - €81.72m
9. Angel di Maria - to Manchester United in 2014/15 - €75m
10. James Rodriguez - to Real Madrid in 2014/15 - €75m
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Champions League last 16, first leg
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match info
Chelsea 2
Willian (13'), Ross Barkley (64')
Liverpool 0
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Tips to keep your car cool
- Place a sun reflector in your windshield when not driving
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THE BIO
Ambition: To create awareness among young about people with disabilities and make the world a more inclusive place
Job Title: Human resources administrator, Expo 2020 Dubai
First jobs: Co-ordinator with Magrudy Enterprises; HR coordinator at Jumeirah Group
Entrepreneur: Started his own graphic design business
Favourite singer: Avril Lavigne
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Family: Six sisters
UAE currency: the story behind the money in your pockets
Our legal consultant
Name: Dr Hassan Mohsen Elhais
Position: legal consultant with Al Rowaad Advocates and Legal Consultants.