RIYADH: Eight members of the Organization of the Petroleum Exporting Countries and its allies, known as OPEC+, agreed on Thursday to extend their voluntary supply cuts until the end of November, postponing a planned output increase amid falling crude prices.

The eight OPEC+ nations are Saudi Arabia, Russia, Iraq, the UAE, Kuwait, Kazakhstan, Algeria, and Oman. Their voluntary supply cuts of 2.2 million barrels per day will be extended for two months until the end of November 2024, the alliance said in a statement.

The extension of supply cuts comes amidst a backdrop of tightening U.S. crude supplies and rising domestic demand in Saudi Arabia that contributed to a noticeable slump in exports from the world's biggest crude oil exporters. Saudi Arabia, Russia, and the United States saw a combined shipment drop of nearly 700,000 barrels per day (bpd) in August from July, according to an analysis by oil flow tracking firm Vortexa.

Total crude exports from these three nations fell to 12.7 million bpd last month, down by nearly 700,000 bpd month-on-month. Despite this significant decline, global exports only fell by 260,000 bpd in August, as other exporters raised their shipments.

The U.S. experienced the steepest decline among the Big 3 exporters with a reduction of around 540,000 bpd. This marks the lowest monthly total for U.S. exports since January 2023. Saudi Arabia's exports dropped by 110,000 bpd while Russia's shipments fell by 40,000 bpd compared to July. Tightened U.S. crude supplies have been attributed to sharp draws in Cushing inventories and struggling production growth. As Jay Maroo, Head of Market Intelligence & Analysis (MENA) at Vortexa, noted, flows to Europe have been ramping up.

For Saudi Arabia, the decline in exports for the month of August was not unexpected due to higher demand for oil burn for power generation within the Kingdom. It's anticipated that Saudi exports may pick up in the coming weeks as domestic power generation needs wane, potentially freeing up supply for exports.

In Russia, a slight drop in exports in August may continue if China's oil demand persists in its downturn. Unlike Riyadh, Moscow lacks willing buyers lining up for Russian crude, according to Vortexa.

Additionally, OPEC+ nations reached an agreement to delay the planned October increase of 170,000 barrels per day in oil production to a later date. Originally, eight volunteer countries within OPEC+ were set to begin reducing their cutbacks of 2.2 million barrels per day starting in October, increasing production from 35.612 million bpd in September to 35.782 million bpd in October.

However, with three countries overshooting production volumes in the initial seven months of the year, they pledged to make amends gradually until September 2025. As per the plan, Iraq was set to cut back another 90,000 bpd in August, and Kazakhstan by 49,000 bpd, while Iraq is to further reduce production by 95,000 bpd, Kazakhstan by 265,000 bpd, and Russia by 10,000 bpd in October. Consequently, OPEC+ output is projected to decrease in October by 67,000 bpd to 35.42 million bpd.

The situation with global crude oil inventories also reflects these developments. U.S. crude oil inventories fell to their lowest since September 2023 as imports dropped, while gasoline stockpiles rose with the end of the summer driving season, according to the Energy Information Administration (EIA).

In a report, the EIA noted that crude inventories, excluding the Strategic Petroleum Reserve, fell by 6.9 million barrels to 418.3 million barrels in the week ending August 30, outperforming analysts' expectations of a 993,000-barrel draw. Net U.S. crude imports fell last week by 853,000 bpd to 2 million bpd while exports increased by 85,000 bpd to 3.8 million bpd.

U.S. crude oil futures and Brent crude futures saw gains following the EIA report, rising 2 percent and 1.6 percent respectively. Crude stocks at the Cushing, Oklahoma delivery hub for U.S. futures fell by 1.1 million barrels while refinery crude runs increased by 36,000 bpd for the week. Refinery utilization rates remained stable at 93.3 percent of total capacity.

As the global oil market grapples with shifts in supply and demand, these strategic decisions by OPEC+ members and fluctuations in major exporters' shipments underscore the volatility and complexity of the energy sector. The extension of supply cuts and delayed production increases aim to stabilize the market amidst various geopolitical and economic pressures.