The Organization of the Petroleum Exporting Countries (OPEC+) on Sunday agreed to extend output cuts through next year, likely keeping prices high through the November presidential election.
The alliance said after a meeting Sunday that the move was aimed at boosting slack prices that have lulled despite the ongoing war in Gaza and attacks on shipping vessels in the Red Sea.
International benchmark Brent has hovered in the $81-$83 per barrel range for the past month, reaching nowhere near the $100 per barrel levels not seen since late 2022. Contributing factors include higher interest rates, concerns about demand due to slower-than-desired economic growth in Europe and China, and rising non-OPEC supply including from U.S. shale producers.
At Sunday's meeting, OPEC+ announced the extension of additional voluntary cuts of 1.65 million barrels per day, implemented initially in April 2023, until the end of December 2025.
For Saudi Arabia, the bloc's dominant member, this strategy is critical as the nation aims to diversify its economy away from fossil fuels. Similarly, Russia views the move as essential for maintaining economic stability amid its ongoing conflict in Ukraine.
Analysts predict that the cuts might push oil prices higher in the forthcoming months, especially ahead of the crucial November elections in the United States. Historically, summer sees a spike in demand, but analysts remain uncertain about demand post-September.
American motorists have enjoyed the benefits of weaker oil prices that have stagnated lately, with averages around $3.56 per gallon—a penny less than a year ago and significantly lower than the record high of $5 per gallon in June 2022.
OPEC+ extends cuts as oil demand wavers. OPEC and its allies have decided to prolong official crude production cuts till 2025 amid tepid demand. Additionally, key members like Saudi Arabia and Russia will continue voluntary cuts of 1.7 million barrels per day.
Saudi Arabia's energy minister, Prince Abdulaziz bin Salman, emphasized the need for concrete rate cuts before accounting for potential impacts on energy demand. Simultaneously, Saudi Aramco launched a massive share sale aiming to raise around $12 billion, part of a broader strategy to diversify the kingdom's economy.
The announcement of the output cuts comes amidst lackluster demand and the alliance's ongoing calculations around the future of energy needs.
In other news, Nvidia has revealed its new generation AI chip called Rubin, set to be launched in 2026. These new advancements come just months after the Blackwell model and underline the intense competition from other tech giants.
Regarding financial markets, the Dow Jones experienced its best day of 2024 after the Federal Reserve's preferred inflation measures indicated cooling inflation. This led to a surge in sales for companies like Salesforce and UnitedHealth.
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In medical advancements, Moderna's RVS vaccine received FDA approval, marking an important milestone for the company beyond its COVID-19 related vaccines.
