OPEC+, responsible for nearly half of global oil production, had planned to ease cuts in October 2024. However, slowing global demand and increased output from non-OPEC producers prompted the group to postpone its plans, signaling caution amidst market challenges.
OPEC+ has decided to delay its planned oil output hike from January 2025 to April 2025, while extending production cuts of 5.86 million bpd until the end of 2026. These strategic changes, influenced by slowing global demand and rising non-OPEC output, aim to stabilize the oil market amidst challenging conditions.
Postponing Output Hikes and Extended Cuts
OPEC+ has deferred its planned oil production hike from January to April 2025, extending output cuts of 5.86 million barrels per day (bpd)—equivalent to 5.7% of global demand—until the end of 2026. These cuts include 2 million bpd by the group, 1.65 million bpd from eight key members, and an additional 2.2 million bpd through voluntary commitments. The gradual unwinding of these cuts, starting April 2025, will conclude by September 2026. Notably, the UAE secured an output increase of 300,000 bpd beginning April 2025, earlier than previously planned. This decision reflects OPEC+’s strategy to stabilize oil markets amid slowing global demand and rising output from non-OPEC producers. Brent crude prices, hovering around $73 per barrel, highlight ongoing challenges despite these measures.
The group’s supply strategies have been instrumental in maintaining oil prices within the $70–$80 range for much of 2024, despite hitting a low below $69 in September. By postponing production increases and extending cuts, OPEC+ aims to balance supply-demand dynamics while accommodating the UAE’s strategic interests. The approach underscores OPEC+’s influence, representing nearly half the world’s oil output, in navigating volatile market conditions and ensuring price stability over the medium term.
UAE’s Output Adjustment
The UAE has negotiated a significant adjustment within OPEC+, allowing it to increase oil production by 300,000 barrels per day (bpd) starting in April 2025. This change extends until September 2026, replacing an earlier plan that would have permitted the hike from January 2025. The UAE’s enhanced production capacity reflects its growing prominence within the OPEC+ framework and aligns with its strategic interests in balancing domestic economic priorities and group commitments. This adjustment comes amid OPEC+ efforts to manage global supply-demand dynamics, which remain fragile due to slowing global demand and rising non-OPEC production.
Economic and Market Context
OPEC+ has extended its oil output cuts until 2026, which has helped maintain oil prices in the $70 to $80 per barrel range throughout 2024. Recently, Brent crude traded near $73, up from a low of $69 in September. This stable price range reflects OPEC+’s cautious approach due to slowing global demand and rising production from non-OPEC members, which has created uncertainty in the market.
For India, this OPEC+ decision is highly significant, as the country is heavily reliant on oil imports, with around 85% of its crude oil demand being met from external sources. A stable to rising price range, like $70 to $80 per barrel, means that India may not see sharp fluctuations in oil prices, offering some predictability for both consumers and businesses. However, even modest price increases could still strain India’s fiscal balance, as higher oil prices directly impact the cost of imports, inflation, and government subsidy programs.
For Indian oil companies like Reliance Industries, Bharat Petroleum, and Indian Oil, stable oil prices typically benefit refining margins, as they can plan their operations with more certainty. However, any prolonged increase in oil prices can also lead to higher input costs, which may squeeze margins. Investors should watch for market reactions to OPEC+’s decisions, as oil stocks in India could experience short-term gains if stability leads to improved profit outlooks for refiners.
Overall, while India stands to gain from more predictable pricing, risks remain if oil prices rise significantly beyond the $80 per barrel range.
