OPEC+ has announced a decision to extend its voluntary production cuts by another month. This means that the 2.2 million barrels per day of additional supply, will now be phased in starting from January 2025. This gradual increase of approximately 180,000 bpd per month is a positive development for the VLCC market.
Historically, OPEC production, particularly from Middle Eastern producers, has shown a strong correlation with VLCC cargo counts. With OPEC+ withholding supply, the VLCC market has faced considerable pressure, so the upcoming return of this production, which is predominantly from Middle Eastern members of the alliance, is a positive development.
The additional 2.2 million barrels per day, phased in over 12 months, could require an additional 55 VLCCs to transport the increased volume of Middle Eastern crude if it all heads to destinations east of Suez. This is a significant boost for the VLCC market outlook for 2025.
