Organically: how the extension of OPEC+ agreements will affect the market

OPEC+ decision to extend oil production restrictions will contribute to the stabilization of quotations and, most likely, will strengthen them at the level of $70-75 in the coming months. Experts told Izvestia about it. On December 5, a ministerial meeting of the organization of oil exporting countries was held. The states of the alliance decided to extend the current terms of the deal to reduce production until April 2025. After that, until the end of September 2026, the organization planned a gradual withdrawal from voluntary reductions of 2.2 million barrels per day. OPEC+ decision to postpone the increase in oil production looks extremely cautious and favorable to the countries that are interested in maintaining current prices, including Russia, analysts say.

Conciliation measures

A ministerial meeting of OPEC+ countries was held on December 5. The states of the alliance decided to extend the current terms of the deal to reduce oil production until April 2025. This is stated in a statement published on the OPEC website. From April 2025 to the end of September 2026, the organization plans to gradually withdraw from the voluntary cuts of 2.2 million barrels per day, which were assumed in November 2023 by eight countries: Russia, Saudi Arabia, UAE, Algeria, Iraq, Kuwait, Oman and Kazakhstan.

The remaining cuts (1.65 million bpd) and existing production curtailment quotas will continue until the end of December 2026. The largest volume of reductions, both mandatory and voluntary, falls on Russia and Saudi Arabia (about 9 million barrels per day for each state).

As "Izvestia" wrote, initially OPEC+ countries were supposed to start gradually returning production volumes to the oil market until December 2025, but later agreed to postpone the gradual recovery from October to December.

- The decision turned out to be a compromise. That is, the increase in production of individual countries will be allowed from April 2025, although the overall reduction of oil production by 3.65 million barrels per day by the oil alliance will continue until the end of September 2026. At the same time, the UAE and Russia and perhaps some other countries have been allowed to very gradually increase production from April 2025, with the rate of increase, at least by Russia, to be a little faster next December. For those countries that have been planning to increase production for a long time, but could not do so because of the strict OPEC+ quotas, such authorizations are certainly good news," explained Natalia Milchakova, lead analyst at Freedom Finance Global.

OPEC+ countries are ready to increase production, but at a moderate pace, which will generally contribute to the stabilization of quotations, said Dmitry Gusev, Deputy Chairman of the Supervisory Board of the Reliable Partner Association, to Izvestia. Even if there is a short-term decline in oil prices on the background of news about the growing supply on the market, it will be insignificant, the most likely that raw materials will be traded in the range of $70-75 in the coming months, the expert noted.

- The decline in the cost of fuel, which may occur in April 2025 due to a gradual increase in production, may even benefit the oil market, it will cool down a little. With lower prices, we can expect higher demand from importers, primarily China. So the demand for Russian oil, in our opinion, will not decrease next year at least," says Natalia Milchakova.

In 2025, the price of Brent oil can be expected to average $60-80 per barrel, the expert estimated.

Factors of influence

Over the past month, oil quotations have declined: on November 5, a barrel of Brent traded at a cost of about $75.5, and on December 5 at around 14:00 Moscow time, the price was about $72.7. At the same time, after the announcement of the OPEC+ decision, the quotes remained at about the same level, according to ICE trading data.

Oil quotes will still be influenced by two groups of factors: the dynamics of demand in the largest importing countries (China and India), as well as the level of geopolitical tension in the Middle East, said Valery Andrianov, associate professor at the Financial University under the Government of the Russian Federation.

- In recent days we have seen a new portion of negative information for the oil market from China - about the accelerated transition of Chinese people to electric cars. This news, which appeared just on the eve of the OPEC+ meeting, presses prices downward and may become the factor that will encourage the countries - members of the alliance to again push back the terms of production recovery, - said the expert.

At the same time, Valery Andrianov emphasized that the situation in the Middle East remains the background that keeps prices from falling significantly. The aggravation in Syria can be considered as the next stage of escalation, capable of leading to large-scale consequences, especially in the case of involvement of Iranian armed forces in the conflict, the analyst believes.

The situation in northwestern Syria began to deteriorate on November 27, when militants of Hayat Tahrir al-Sham, representing a rebranding of the organization Jebhat al-Nusra (recognized as a terrorist organization and banned in Russia), the former branch in Syria of al-Qaeda (also banned in Russia), launched an attack in the direction of the cities of Aleppo and Hama. Already on November 30, Aleppo and its vicinity, including the international airport, was seized by terrorists, Izvestia wrote. Later, Iran's Foreign Ministry reported a possible meeting with Russia, Turkey and Qatar on Syria.

The cost of fuel may also be affected by Donald Trump's policy as US president, the potential increase in shale oil production in the US region, Saudi Arabia's position on limiting production, as well as the dynamics of production in countries not limited by quotas, such as Venezuela, Libya, Iran and Canada, said BitRiver financial analyst Vladislav Antonov.

- OPEC+'s decision to postpone the increase in oil production looks extremely cautious and favorable to the countries that are interested in maintaining current prices, including Russia. Domestic interests coincide with Saudi interests - preservation of the current price environment and prevention of sharp market collapses, the expert said.

OPEC+ has actually frozen plans to increase production until the price rises to $80 per barrel, said Vladislav Antonov. The cartel will maneuver as carefully as possible to maintain a balance between production volumes and the cost of oil, avoiding sharp market fluctuations, the expert believes.