Opec+ agreed on Sunday to extend most of its deep oil output cuts well into 2025, exceeding market expectations as the group seeks to shore up the market amid tepid demand growth, high interest rates and rising rival US production.

Oil prices trade near $80 per barrel, below what many Opec+ members need to balance their budget. Worries over slow demand growth in top oil importer China have weighed on prices alongside rising oil stocks in developed economies.

The Organization of the Petroleum Exporting Countries and allies led by Russia, together known as Opec+, have made a series of deep output cuts since late 2022.

Opec+ members are currently cutting output by a total of 5.86 million barrels per day (bpd), or about 5.7 per cent of global demand.

Those include 3.66 million bpd of cuts, which were due to expire at the end of 2024, and voluntary cuts by eight members of 2.2 million bpd, expiring at the end of June 2024.

On Sunday, Opec+ agreed to extend the cuts of 3.66 million bpd by a year until the end of 2025 and prolong the cuts of 2.2 million bpd by three months until the end of September 2024.

Opec will spend one year on gradually phasing out cuts of 2.2 million bpd starting from October 2024 until the end of September 2025, three Opec+ sources said.

“Now the market has clarity for almost 1.5 years,” an Opec+ delegate said, declining to be named.

Amrita Sen, co-founder of Energy Aspects think tank, said: “The deal should allay market fears of OPEC+ adding back barrels at a time when demand concerns are still rife”.

Quick deal

The meetings on Sunday lasted less than four hours - an unusually small amount of time for such a complex deal.

The United Arab Emirates has been pushing for a higher production quota arguing its capacity figure had been long under-estimated.

But in a surprise development, Opec+ postponed the discussions on capacities until November 2025 from this year.

Instead, the group agreed a new output target for the UAE which will be allowed to gradually raise production by 0.3 million bpd, up from the current level of 2.9 million.

Sources have said Opec’s de facto leader and biggest producer Saudi Arabia had spent days pre-cooking the deal behind the scenes.

Its influential energy minister Price Abdulaziz bin Salman invited some key ministers — mostly those who contributed to the voluntary cuts — to come to the Saudi capital Riyadh on Sunday despite meetings being largely scheduled online.