The OPEC+ oil output delay is a "reality check" for the group as it considers demand and the U.S. outlook, according to Saudi Energy Minister.

• On Friday, Saudi Energy Minister Abdulaziz bin Salman stated to CNBC's Dan Murphy that OPEC+ must conduct a "reality check" and align supply-demand indicators with market sentiment.
• The minister acknowledged that OPEC+ had not necessarily lost confidence in global crude appetite or recoveries in China, but admitted that some countries were not fulfilling their commitments properly.
• OPEC+ has intensified its enforcement of member adherence to individual quotas, as seen in the past with countries such as Iraq, Kazakhstan, and Russia.

The OPEC+ coalition has decided to delay crude production hikes until after the first quarter to evaluate global demand, European growth, and the U.S. economy, as stated by Saudi Energy Minister Abdulaziz bin Salman, the group's chair.

The oil producers' alliance agreed to extend several output cuts, with the timeline to start gradually unwinding a 2.2-million-barrels-per-day voluntary decline undertaken by a subset of OPEC+ members pushed back by three months to April.

The coalition is extending its formal policy of restricting production until December 31, 2026, while several group members are also delivering a second voluntary production decline.

The Saudi energy minister stated on Friday that OPEC+ must conduct a "reality check" and align supply-demand signals with market sentiment while addressing the fundamentals, but also find a way to mitigate negative sentiments within the constraints of what OPEC+ can do.

The analysts from Barclays concurred with the minister's viewpoint, stating that the alliance maintained a conservative approach and emphasizing that market share concerns among members were likely overstated.

OPEC+ is confronted with a range of factors affecting the supply-demand balance and geopolitical uncertainties, including economic growth with lower inflation, conflict in the oil-rich Middle East, and the return of President-elect Donald Trump, who has been a long-time advocate for the U.S. oil industry and has implemented protectionist tariffs on China and imposed sanctions on Iran for its nuclear program during his first term.

The Saudi energy minister stated on Friday that there are numerous other factors to consider, such as growth in China, events in Europe, and the state of the U.S. economy, including interest rates and inflation.

"The main reason for moving or shifting the delivery of these ballots is due to supply-demand fundamentals. It is not advisable to bring large volumes in the first quarter."

In the first quarter, there is usually a rise in inventory levels because of reduced demand for transport fuels.

OPEC+ member compliance

In a Friday note, HSBC analysts determined that the Thursday OPEC+ agreement is "marginally supportive" for supply-demand balances, resulting in a projected market surplus of only 0.2 million barrels per day in 2025 if the oil producers' alliance increases production in April.

"Another delay could leave the market in balance next year, as OPEC+'s decision to hold off strengthens fundamentals in the near term but could be seen as an implicit admission that demand is sluggish."

The OPEC's November Monthly Oil Market Report predicts a year-on-year growth of 1.54 million barrels-per-day in demand for oil in 2025.

The International Energy Agency, based in Paris, predicted that global oil demand will increase by 920,000 barrels per day in 2021 and 990,000 barrels per day in 2025.

The government's stimulus measures have helped boost China's convalescent economy, but market concerns remain about the outlook of the world's largest crude importer.

OPEC+ did not necessarily lose confidence in global crude appetite or recoveries in China, but some countries in the organization were not fulfilling their commitments properly, according to Abdulaziz bin Salman.

OPEC+ has intensified its enforcement of member adherence to individual quotas, including countries such as Iraq, Kazakhstan, and Russia, and demands overproducers to offset excess barrels through additional reductions by the end of June 2026.

Despite the three-pronged extension to production hikes, oil prices have retreated, with the Ice Brent contract with February expiry trading at $71.40 per barrel at 2:46 p.m. London time, down by 0.96% from the Thursday close. Similarly, front-month January Nymex WTI futures dipped to $67.63 per barrel, lower by 0.98% from the previous day's settlement price.

According to UBS Strategist Giovanni Staunovo, while prices are expected to remain volatile in the near term, falling inventories this year and a closely balanced market next year will support prices, in contrast to market expectations for a strongly oversupplied market, over the coming months.