Saudi Energy Minister Prince Abdulaziz bin Salman recently countered a bearish view on the OPEC+ agreement, asserting that OPEC+ can pause or reverse oil production increases if market conditions deteriorate.

• OPEC+ Control: The agreement extends for a year and a half which allows OPEC+ to monitor market conditions and adjust production as needed.

What is OPEC+?

OPEC Plus refers to non-OPEC countries (10) that export crude oil in addition to the 12 OPEC member nations.

Key Players in the OPEC Plus Alliance

• Saudi Arabia and Russia: For the past three years, Saudi Arabia and Russia have played central roles in the OPEC Plus alliance.
• Alliance Objective: The alliance initially included 11 OPEC members and 10 non-OPEC nations, and it aimed to stabilize oil prices through coordinated production cuts.

Enroll now for UPSC Online Course

New OPEC+ Agreement Details

• Production Cuts: OPEC+ agreed on a complex deal to extend significant production cuts until 2025.
  • Current Cuts: The group is cutting output by 5.86 million barrels per day (bpd), approximately 5.7% of global demand.
• Voluntary Cut Phase-out: Several OPEC+ members, including Russia, decided to gradually eliminate voluntary cuts of 2.2 million barrels per day (bpd) over the course of a year, starting in October.
  • OPEC+ also agreed to maintain other cuts of 3.66 million bpd until the end of 2025.

Why Some View the OPEC+ Agreement as Bearish for Oil Prices?

• Gradual Production Increase Seen as Bearish: The agreement to phase out additional production cuts of 2.2 million barrels per day (bpd) over a year is considered bearish because 
  • It can increase supply, which could weaken oil prices.
• Goldman Sachs Disagrees with OPEC+ Figures: Goldman Sachs used figures from OPEC+ to conclude. 
  • It was confirmed when the Saudi energy minister claimed Goldman Sachs based their bearish outlook on inaccurate figures but didn’t specify the discrepancies.

Check Out UPSC Modules From PW Store

• Price Drop Attributed to Misinterpretation: Russia attributes the recent oil price decline to a misreading of the agreement and speculative trading, not to actual supply changes.

DOWNLOAD PDF