OPEC+ oil producers' alliance postpones production increases as crude prices stagnate

The logo of the Organization of the Petroleoum Exporting Countries (OPEC) is seen outside of OPEC's headquarters in Vienna, Austria, March 3, 2022. (AP Photo/Lisa Leutner, File)

FRANKFURT, Germany -

Eight members of the OPEC+ alliance of oil exporting countries decided Thursday to put off increasing oil production as they face weaker than expected demand and competing production from non-allied countries — factors that could keep oil prices stagnant into next year.

The OPEC+ members decided at an online meeting to postpone by three months production increases that had been scheduled to take effect Jan. 1. The plan had been to start gradually restoring 2.2 million barrels per day over the course of 2025. That process will now be pushed back until October 2026.

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OPEC+, which includes Saudi Arabia as the dominant member of the OPEC producers’ cartel, and Russia as the leading non-OPEC member in the 23-country alliance, have imposed several sets of cuts to agreed output to support prices.

Oil prices have been slack due to weaker than expected demand from China as well as increased production from countries like Brazil and Argentina that aren’t in OPEC+.

Among the beneficiaries of the current state of the oil market are U.S. motorists, who have seen gasoline prices fall to their lowest in 2 1/2 years to near US$3 a gallon.

THIS IS A BREAKING NEWS UPDATE. AP’s earlier story follows below.

Members of the OPEC + alliance of oil exporting countries will decide Thursday whether to put off plans to pump more crude amid sluggish demand and competing production from non-allied countries -- factors that could keep oil prices stagnant into next year.

Key beneficiaries of that would be U.S. motorists, who have seen gasoline prices fall to their lowest in 2 1/2 years to near US$3 a gallon.

OPEC+, which includes Saudi Arabia as the dominant member of the OPEC producers' cartel, and Russia as the leading non-OPEC member in the 23-country alliance, is holding an online meeting over whether to put off production increases that are scheduled to take effect Jan. 1.

Eight OPEC+ members planned to start increasing production from Jan. 1 by gradually restoring 2.2 million barrels per day in previous production cuts. Analysts now say the group could postpone production increases for another three months as it monitors demand.

Oil prices have been slack due to weaker than expected demand from China as well as increased production from countries like Brazil and Argentina that aren't in OPEC+. Oil analysts have been busy reducing their estimates for demand for next year, meaning that OPEC+ could remain in a bind well into 2025.

The Saudis need oil revenue to carry out Crown Prince Mohammed Bin Salman’s ambitious plans to diversify his country’s economy, including the development of Neom, a US$500 billion futuristic city in the desert. For Russia, oil export revenues are a key pillar of state finances and funding for the war against Ukraine. Holding back production risks losing market share. Yet increasing production and sales could lower prices in a global economy that analysts say is already well supplied with oil.

U.S. oil has been stuck around US$70 per barrel and traded at US$68.92 on Thursday ahead of the meeting, down from US$80 in August. International benchmark Brent crude traded at US$72.66 per barrel, down from around US$80 in July.

One result of those slack prices is that U.S. average pump prices for gasoline fell to US$3.03 a gallon this week, the lowest since May, 2021 and well down from their record peak of US$5.02 from June, 2022, according to motoring club AAA.

Thirty-one U.S. states now have average gas prices below US$3 a gallon.

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U.S. oil price levels of US$70 or less “are great for consumers,” said AAA spokesman Andrew Gross. Crude oil makes up about half the price of a gallon of gasoline, making crude the key factor on top of distribution costs and taxes. Motorists in Europe see far smaller fluctuations because taxes make up a much bigger chunk of the cost.

OPEC has cut its forecast for 2025 demand growth to 1.54 million barrels per day, from 1.85 million barrels per day in July. That is at the high end of estimates compared to those from the International Energy Agency at 990,000 barrels per day, U.S. Energy Information Administration at 1.22 million and energy intelligence firm Rystad Energy at 1.1 million.

Analysts at Commerzbank foresee Brent prices averaging US$75 per barrel in the first quarter of next year and US$80 for the remaining three quarters.

In the United States, Donald Trump’s return to the White House will likely lead to more fossil fuel production. Not only has the U.S. president-elect campaigned on more drilling, but his Treasury secretary nominee Scott Bessent has put together an economic plan with the goal of increasing domestic oil production by the equivalent of three million barrels a day. Bessent has indicated that the additional oil production would reduce inflationary pressures for U.S. consumers. But the Trump team has not fully outlined why oil producers would ramp up supplies and lower prices to levels that could hurt their profits.

The Organization of the Petroleum Exporting Countries (OPEC) is an intergovernmental organization founded in 1960, by Iran, Iraq, Kuwait, Saudi Arabia and Venezuela. It has since expanded to 12 member countries. In 2016, largely in response to dramatically falling oil prices due to U.S. shale oil output, OPEC signed an agreement with 10 other oil-producing countries to create OPEC+.

Josh Boak contributed from Washington DC.

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