What’s going on here? OPEC+ has agreed to keep its steep oil production cutbacks going for a while longer, in a combined push to keep prices from falling. What does this mean? The group of oil-producing countries is already churning out almost six million barrels per day less than it could be – strategically leaving global supply short by about 6%. The biggest single reduction, which takes roughly 3.7 million barrels per day out of the market, was set to expire at the end of this year, but will now drag on until the end of 2025. OPEC+ announced its new agreement on Sunday, just as Saudi Arabia kicked off a massive $12 billion sale of Aramco stock – a move that will help the kingdom bankroll some massive infrastructure improvements. Why should I care? Zooming out: Team players. OPEC+ isn’t trying to sell less oil: the slick stuff is its bread-and-butter export. These shared cuts are designed to match supply to potentially falling demand and prevent a global surplus that would knock oil’s price lower. Problem is, the strategy only pays off if producers remain disciplined. And the organization’s already running into some trouble, with not everyone sticking to the plan: Russia, Iraq, and Kazakhstan pumped more crude than they were allowed to in April. Meanwhile, a surge in production from the US, Canada, Brazil, and other non-OPEC+ countries has weakened the group’s market share to less than 40%. The bigger picture: Privileged position. US oil and gas producers are no doubt rubbing their hands together at the news of OPEC+ extending its cuts. After all, they can – and likely will – quickly ramp up their output. What’s more, the latest flurry of deals in the industry shows that firms are gearing up to enjoy the benefits that come with scale: falling costs, rising profit, and a stronger position in the global market. | 