Opec+ recently decided to postpone a planned oil output increase for October and November, citing concerns over the weak global economy and soft data from China. The producers’ group stated that they may extend the pause or reverse the hikes if necessary. The decision came after crude prices hit their lowest point in nine months, prompting a virtual meeting of eight Opec+ members to deliberate on the matter.
The eight participating countries, which include the Organisation of the Petroleum Exporting Countries and allies led by Russia, agreed to prolong their additional voluntary production cuts of 2.2 million barrels per day for two months until the end of November 2024. This news caused a rally in oil prices, with Brent futures trading over $74 a barrel before retracting gains. Opec+ had initially planned to increase output by 180,000 bpd in October, but decided to maintain the current levels due to uncertainty in demand and rising supply from non-Opec countries.
The fragile sentiment in the oil market, exacerbated by the potential influx of more supply from Opec+ and the resolution of a dispute affecting Libyan exports, influenced the decision to delay the output increase. The Joint Ministerial Monitoring Committee of Opec+ is set to convene in October to discuss any recommendations for policy changes, with a full meeting of the group scheduled for December 1.
Concerns over weak Chinese demand and a decline in global refining margins have contributed to the decision to hold back on the output increase. The ongoing disputes in Opec producer Libya, which led to a significant loss of production, have also impacted oil prices in recent weeks. Analysts suggest that it may be prudent for Opec+ to wait until December before considering any additional output adjustments to avoid further market volatility.
The planned increase in output was initially intended to come from the eight Opec+ members who agreed in June to gradually unwind the current cut of 2.2 million bpd starting from October 2024. However, the group’s decision to extend the voluntary production cuts until November 2024 indicates a cautious approach to market dynamics. The phased withdrawal of the cuts beginning on December 1 and continuing until November 2025 allows for flexibility in adjusting output levels as needed.
Overall, Opec+ aims to balance market stability with global demand fluctuations and supply uncertainties. The group continues to monitor market conditions and international developments to ensure a sustainable and orderly approach to managing oil production. By extending the output cuts and allowing for potential adjustments in the future, Opec+ is demonstrating a commitment to supporting oil prices and fostering a stable energy market environment.
