On Sunday, eight OPEC+ countries confirmed they would extend their ongoing production cuts by another month, pushing the end date to December. These production cuts, amounting to a significant 2.2 million barrels per day (Mb/d), were initially agreed upon last year as part of a strategy to stabilize global oil prices. UBS analyst Henri Patricot sees this extension as a modest positive factor for oil prices, as it helps counterbalance a seasonal lull in demand and a recent increase in global oil supply.

Why the Extension Matters for Oil Markets

Typically, the end of the year is marked by weaker seasonal demand for oil, and the extension of production cuts is one of OPEC+’s tools to counteract this trend. This decision comes on the heels of a quick rebound in Libyan oil production, which could have otherwise created an oversupply. By maintaining these cuts, OPEC+ aims to keep the market balanced, reducing the risk of a price drop that could be triggered by an excess supply at a time when demand softens.

UBS Research points out that the impact of this extension is likely to keep Brent crude prices steady, around an average of $75 per barrel in 2025. While this is positive news for stability, UBS also notes that some OPEC+ members have had mixed success in compensating for periods of overproduction. This uneven compliance can add unpredictability to oil prices in the coming months.

What’s Next for Oil Prices?

Looking into next year, UBS Research anticipates a largely balanced oil market, partly due to OPEC+’s measured approach to production adjustments. With no rapid increase in production anticipated, Brent prices are expected to remain stable, helping to protect oil-exporting economies while also keeping energy costs predictable for consumers and businesses.

While this extension may not lead to significant price hikes, it shows OPEC+’s commitment to maintaining market stability, especially during unpredictable periods in global demand. For now, analysts will be closely watching both compliance levels within OPEC+ and any potential shifts in global oil consumption patterns as 2024 unfolds.

Overall, the decision to extend cuts provides a steadying hand to the market, reinforcing OPEC+’s influence on oil prices as they navigate a complex, shifting landscape.