Several months into the Covid-19 pandemic, OPEC+ was faced with a collapse in oil demand due to widespread lockdowns. So, in April 2020, the cartel agreed to a production cut of 9.7 million barrels per day (Mb/d) representing about 10% of global crude oil output.
In July 2020, OPEC+ reduced the cuts to 7.7 Mb/d. OPEC’s actions stabilized the oil markets and when oil demand started to recover from the pandemic, they started to gradually increase output again. However, continued increases in non-OPEC output, geopolitical turmoil and a slowdown in oil demand growth forced OPEC to reverse some of the output increases. In April 2023, OPEC+ surprised the market by announcing additional cuts, including a voluntary (supplementary) cut by Saudi Arabia on 1 Mb/d. These cuts have been largely maintained until now, but OPEC+ has indicated that some of the production restrictions will be relaxed by the end of September.
OPEC+ has announced that 2.2 Mb/d of cuts will be gradually phased out on a monthly basis from October 2024 through September 2025. In this Tanker Opinion, we’ll discuss the likelihood that this actually happens.