Investing.com — The decision by OPEC+ to extend its production cuts through December is seen by UBS analysts as a modest but positive step for oil prices in the short term.
This extension maintains a cut of 2.2 million barrels per day (Mb/d), an agreement initially struck last year.
UBS noted that while this action aligns with their expectations, market speculations about a potential production increase had raised concerns prior to the announcement, making the continuity of cuts a reassuring factor for price stability.
UBS outlines that OPEC+ remains cautious about reintroducing additional barrels into the market, particularly as demand typically softens seasonally at this time of year.
A sudden increase in production from Libya had already somewhat alleviated supply constraints, further justifying the extended restraint by OPEC+.
This approach reflects a prudent stance from OPEC+ amid mixed compliance on compensation requirements from members like Iraq, Kazakhstan, and Russia who had exceeded previous production targets.
Looking beyond December, UBS anticipates that apprehensions regarding potential output increases will persist, with the group scheduled to review policy in early December.
A more substantial production ramp-up is currently slated for 2025, at which point OPEC+ will likely reassess market conditions and U.S. policy implications, though UBS maintains that sluggish demand growth and stable output from non-OPEC sources could still discourage any major increases.
“We see the market just about balanced next year with no unwind of the production cuts, which keeps Brent at an average $75/bbl in 2025 in our base case,” the analysts said.
This post is originally published on INVESTING.
