OPEC+ Production Cuts Extended

Investing.com — Wells Fargo analysts stated on Thursday that OPEC+’s recent decision to extend production cuts through the end of 2024 is a positive signal for oil prices.

This decision, made in response to declining crude prices, reflects OPEC+’s ongoing commitment to keeping global supply tight and supporting higher oil prices.

Originally, OPEC+ intended to unwind 2.2 million barrels per day of production cuts—approximately 2% of global supply—starting in October 2024 and continuing until September 2025. However, due to recent economic weakness worldwide and falling oil prices, they opted to delay this reduction.

Wells Fargo noted, “OPEC+ postponed upcoming changes to its production policies. Prior to this, they planned to unwind some of their standing production cuts beginning in October 2024,” emphasizing that this extension will help balance the effects of sluggish demand.

The bank remains optimistic about the short-term outlook for oil prices, attributing this stability to the extension of the cuts.

They stated, “We suspect that the extension of production cuts through year-end should help offset recent global demand weakness.”

Wells Fargo keeps its 2024 price targets at $80–$90 per barrel for West Texas Intermediate (WTI) crude and $85–$95 per barrel for Brent crude, with a potential $5 increase by the end of 2025 as economic conditions improve.

Going forward, Wells Fargo is closely observing the global supply situation, particularly for 2025. Despite OPEC+ maintaining production cuts for nearly two years to bolster prices, analysts express uncertainty about how long this support will prevail.

They caution, “We do wonder how much longer it can maintain such support,” although they do not foresee any significant deviation from OPEC+’s current strategy in the immediate future.

Overall, Wells Fargo believes that extending the OPEC+ production cuts is expected to provide stability to the oil market and support prices through 2024.