After another round of drama and a stalling of the talks on Monday, the Tuesday extension of the OPEC+ meeting concluded at long last with a solution upon which all OPEC+ members agreed. But it didn’t end the way anyone thought it would.
Tuesday’s meeting saw the groups agree to lift oil production by 75,000 barrels per day over January levels, according to OPEC’s post-meeting press release.
But Saudi Arabia’s late announcement after the meeting sent oil prices soaring—that Saudi Arabia would voluntarily cut an additional 1 million barrels per day in February and March above its current quota—all while OPEC’s allies get to ramp up production.
The OPEC+ agreed not only for the production levels for February but for March as well. March’s production level will see an additional increase of 120,000 barrels per day over February levels, or 195,000 bpd over January levels.
With March’s production quotas already set, the February meeting, therefore, will set production quotas for April.
The previous meeting held in December adjusted the total production cuts to 7.2 million bpd for January, from 7.7 million bpd before.
But with Saudi Arabia’s additional voluntary cuts, February’s total production cuts will be 8.125 million bpd, and March’s will total 8.05 million bpd.
For Saudi Arabia, there are no changes to its official output quota for either February or March. Neither are there changes to the UAE’s quotas or Iraq’s. In fact, for OPEC, there are no changes for February to the individual quotas. All the production increases, therefore, go to the non-OPEC members, not surprisingly to Kazakhstan and Russia.
Russia’s February production quota increase from 9.119 million bpd in January to 9.184 million bpd. For March, Russia’s production quota again increases to 9.249 million bpd.
That the non-OPEC group was the only group afforded increases in production over the next two months, with OPEC, therefore, shouldering more of the burden for the market’s production cuts highlights OPEC’s waning influence in the market as a lone player, and Russia’s growing influence over the oil markets.
Regardless of how the deal shook out between the members, the oil market cheered. Oil prices rallied in the afternoon, with WTI rallying more than 5% and Brent rallying just under 5%.