OPEC+ Agrees On 1 Million Bpd Additional Oil Supply Cut, Alongside Extension Of Saudi 1MMb/d Cut

As previewed repeatedly in recent days, and as Reuters once again leaked overnight, moments ago the delayed OPEC+ meeting concluded with the expanded cartel agreeing on an additional 1 million barrels in production cuts, alongside an extension of Saudi Arabia’s 1 million bpd in voluntary “lollipop” cuts.

While we wait for further details, there is speculation is that of the 1 million “additional” barrels, some 300kb/d is an extension of existing Russian cuts, which means an incremental 700kb/d in cuts are coming from the group. Furthermore, of the balance, 500kb/d may be from those overproducing on their existing quotas. Which would mean new cuts are really just 200kb/d.

In any case while we wait for details, Bloomberg’s Julian Lee calculates that if the extra 1 million barrels a day cut is applied to the existing 2024 targets, with the various voluntary reductions applied on top of that, the new target for Saudi Arabia will be about 8.7 million barrels a day which is just over 200,000 barrels a day above the level to which it’s target was cut in the depths of the Covid-19 pandemic.

In other words, the oil market is about to get very, very tight especially if any of the multiple stimulus packages China is throwing around actually works and China’s economy rebounds.

In response Crude rose just over 2% in New York, peaking around $79.5 before reversing some gains.