By Ahmad Ghaddar, Olesya Astakhova and Alex Lawler
LONDON (Reuters) – OPEC+ has agreed to postpone a planned oil production increase for October and November, the producer group said on Thursday after crude prices hit their lowest level in nine months. She added that she could further pause or reverse the increases if necessary.
Oil prices, like other asset classes, have fallen on concerns about a weak global economy and weak data from China, the world’s largest oil importer. [O/R]
Eight members of OPEC+, made up of the Organization of the Petroleum Exporting Countries and allies led by Russia, which are expected to increase production from October, held a virtual meeting on Thursday, OPEC said in a statement.
“The eight participating countries have agreed to extend their additional voluntary production cuts of 2.2 million barrels per day for two months until the end of November 2024,” OPEC said.
The news lifted oil prices by more than $1 a barrel, with futures trading above $74 before gains fell. This fell to the lowest level of this year on Wednesday.
OPEC+’s planned increase in October was 180,000 barrels per day, a fraction of the 5.86 million barrels per day it is holding back, equivalent to about 5.7% of global demand, to support the market due to the uncertainty about demand and the increasing supply outside the group.
Last week, OPEC+ was expected to continue with the increase. But fragile sentiment in the oil market over the prospect of more supply from OPEC+ and the end of a dispute halting Libyan exports, coupled with a weakening demand outlook, raised concerns within the group, sources said.
OPEC+ ministers will hold a full meeting of the group on December 1 to decide on policy. A group of top OPEC+ ministers convened the Joint Ministerial Monitoring Committee on October 2, which can recommend changes.
CHINA INTEREST
A dispute between rival factions in OPEC producer Libya over control of the central bank, which led to output losses of at least 700,000 barrels per day, has supported oil in recent weeks.
However, prices fell about 5% on Tuesday on news that a possible deal to resolve the conflict was in the works, although no deal on resuming exports has been announced.
Weak Chinese demand and a slump in global refining margins, which could prompt refiners to process less crude, have also weighed.
RBC Capital analyst Helima Croft said in a note that it may be wise for OPEC+ to wait until December before returning additional barrels.
The planned increase in October should come from the eight OPEC+ members who agreed in June to phase out the 2.2 million barrels per day cut – the group’s latest production cut – from October 2024 to September 2025.
OPEC’s statement on Thursday said this reduction will be phased out on a monthly basis after the end of November, starting on December 1 until November 2025, “with the flexibility to pause or reverse the adjustments as necessary.”
The remaining OPEC+ cuts of 3.66 million barrels per day agreed in previous steps will remain in place until the end of 2025.
