Investing.com– The Organization of Petroleum Exporting Countries and allies (OPEC+) said at its recent meeting that it planned to begin scaling back some of its production cuts from later this year- a scenario that Macquarie said presents long-term pressure on oil prices.
The OPEC+ said it will maintain production cuts of 3.6 million barrels per day (bpd) until the end of the year, and 2.2 million bpd of cuts until end-September. The cartel outlined plans to begin scaling back the 2.2 million bpd of cuts from October 2024 to September 2025.
While the OPEC+’s decision to maintain production cuts for the near-term presented tighter oil markets in the summer season, its plans to increase production eventually signaled that the cartel’s support for oil prices was likely to weaken, Macquarie analysts said.
“In total, perhaps it is best to take OPEC+/Saudi Arabia seriously but not literally, with respect to the timing and implementation of this return of supply. Amidst this signalling, and recent strength in OPEC supply to market, we see an intention to not perpetually sacrifice volumes to support the oil market,” Macquarie analysts said.
Oil prices slid to four-month lows after the OPEC+ decision, as traders feared less tight markets in late-2024 and through 2025.
Weak economic readings, coupled with recent signs of increased oil output in non-OPEC countries, particularly the U.S., sparked more fears of oversupplied markets going into 2025.