In a report sent to Rigzone late Thursday by Standard Chartered Bank Commodities Research Head Paul Horsnell, analysts at the bank, including Horsnell, said they don’t think the market has priced in the full extent of how much oil has been removed from the OPEC+ plan.
“We calculate that the previous plan for voluntary cut unwinds and the UAE target increase would have added a cumulative 496.3 million barrels to the market in 2025, whereas the new schedules will add just 191.3 million barrels,” the analysts said in the report.
“Sixty-one percent of the oil that was planned to be added in 2025 will not now be produced. This amounts to 305 million barrels, or an average 836,000 barrels per day,” they added.
In the report, the analysts highlighted that the OPEC+ meeting held yesterday – along with discussions on the sidelines between Saudi Arabia, Russia, Iraq, United Arab Emirates, Kuwait, Kazakhstan, Algeria, and Oman – produced four main changes.
“One – the unwind of the November 2023 tier of voluntary cuts remains subject to market conditions and is now scheduled to start in April 2025 and finish in September 2026, i.e., it will begin three months later than the previous schedule and end nine months later,” they said.
“Two – the UAE’s already-agreed 0.3 million barrels per day base target increase will now be phased in from April 2025 to September 2026 rather than over 12 months starting January 2025,” they added.
“Three – the baselines for all countries with targets have been extended by a year to end-2026; and four – payback schedules for 2024 overproduction will be carried out over 2025 and H1- 2026,” they continued.
The analysts pointed out in the report that the most important of these four points is the first.
“By both delaying the start of voluntary cut unwinds and flattening the slope of the month on month increases, a large amount of oil is removed from the 2025 plan,” they said.
A Rystad Energy oil market update from Rystad Energy Global Head of Commodity Markets Mukesh Sahdev, which focused on the latest OPEC+ meeting and was sent to Rigzone late Thursday, stated that the phase out of cuts shift from 12 months to 18 months is constructive for crude balances for 2025, “with a swing from [an] average 0.7 million barrel per day surplus to [an] average 0.3 million barrel per day deficit”.
“An important announcement was also the confirmation that the UAE’s new baseline … will only start in April 2025 and will be gradually phased in over an 18 month period,” the update added.
“The overall impact on supply growth in 2025 is reduced by 1.03 million barrels per day , and the crude and liquids balances surplus are reduced by the same amount, respectively,” it continued.
“In 2025, crude and condensate were oversupplied by 700,000 barrels per day, now short 335,000 barrels per day (swing of 1.03 million barrels per day). The liquids balance was oversupplied 1.25 million barrels per day, now oversupplied 215,000 barrels per day (same swing of 1.03 million barrels per day),” it went on to state.
The update highlighted that Rystad previously predicted that OPEC+ would extend its production cuts by one to two months “while waiting for Trump 2.0 to take shape, especially any immediate sanctions on Iran and Venezuela, and tariffs on Canada and Mexico”.
It added that OPEC+’s announcement “makes it clear that compliance among members is a concern”, noting that “OPEC+ reemphasized that monthly changes can be paused or reversed at any time”.
In the update, Sahdev said, “oil markets have been anxiously awaiting this OPEC+ meeting since the U.S. election results made clear a Trump 2.0 presidency was on the horizon”.
“Trump’s tariff-forward stance toward China and persisting weak demand provided the group with all of the encouragement needed to extend production cuts until he first quarter of 2025,” Sahdev added.
“The overall signal to the market is constructive and will likely prevent any price downsides in the short term,” the Rystad analyst continued.
“The announcement makes crystal clear that the group is worried about both a potential supply glut and a lack of compliance with production targets among member countries,” Sahdev went on to state.
In a BMI report sent to Rigzone on Friday by the Fitch Group, BMI analysts said the recent decision by OPEC+ to extend its cuts from December 2024 to March 2025 will offer some stability, helping to put a floor under prices.
They added, however, that their data still points to an oversupply next year, “fueled by strong growth in non-OPEC+ production”.
“As is usually the case, uncertainties loom large, not least those concerning the new Trump administration and the implications for geopolitical flashpoints, new tariff measures and oil-related sanctions regimes,” they added.
In that report, BMI analysts highlighted that they had anticipated the extension and that this was already factored into their forecasts, but added that the new, slower schedule “translates into a further 263,000 barrel per day reduction in supply growth on an annual average basis next year”.
“While this will narrow the expected glut, production growth will nevertheless exceed the expected growth in consumption by at least 450,000 barrels per day,” they added.
“Further action from the group could erase our forecast surplus in full, although we estimate that at least another six-month extension would be needed, which is unlikely,” they analysts said in the report.
“Our economists are forecasting an acceleration in global real GDP growth from 2.6 percent in 2025 to 2.9 percent in 2026. Assuming our views on this and, relatedly, on Trump taking a relatively pragmatic approach to policy, play out, we believe oil market sentiment should improve, smoothing the route back to market for OPEC+ barrels over H225,” the BMI analysts continued.
Rigzone has contacted the Trump transition team and OPEC for comment on Rystad’s oil market update and BMI’s report. At the time of writing, neither have responded to Rigzone’s request yet.
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