OPEC+ delays production boost as weak demand lifts prices
The cartel of oil-producing countries expanded to include Russia, and it postponed plans for the return to increased crude production by another month. The decision to delay caused prices to rise.
According to Reuters, OPEC+ announced on Sunday that it would postpone the planned increase in oil production for December by one month. This decision was made in response to weakening demand for oil, especially from China, and the rising supply from outside the group, which puts downward pressure on oil prices in the market.
This caused market prices to rise. On Monday morning, Brent crude was priced at $74.39 (around £61), an increase of 1.74%.
Oil prices closed slightly above $73 per barrel on Friday, partly due to the prospect of another delay in OPEC+'s production increase.
OPEC postpones decisions
Eight countries belonging to OPEC+ were supposed to increase production in December. It was part of the group's plan to gradually withdraw from the latest production restrictions, which included a reduction of approximately 350,000 cubic metres per day. However, sources from Reuters reported that weak demand and economic data raised concerns among member countries about introducing additional supply.
As highlighted in the OPEC statement, the group decided to extend the reduction in production for another month until the end of December.
The statement also emphasized the collective commitment of member countries to comply with the established production targets. According to Reuters, OPEC+ had postponed the production increase from October due to falling prices, weak demand, and rising supplies.
The planned increase for December was set to be around 29,000 cubic metres per day, a small fraction of the total approximately 930,000 cubic metres per day that OPEC+ withholds, equivalent to about 5.7% of the world's demand. OPEC+ agreed to these cuts in separate stages in 2022.
"Market conditions prevailed"
The waning demand for fuel in China and the increasing oil supplies from America are putting pressure on global raw material prices and have caused OPEC+ to refrain from increasing oil supplies for now.
Market conditions prevailed, as indicated by Harry Tchilinguirian, head of oil market research at Onyx Commodities Ltd.
"OPEC+ shows that it cannot ignore the current macroeconomic realities focused around the economies of China and Europe, where a weaker increase in oil demand is visible," he adds.
Analysts indicate that OPEC+'s actions are moderately positive for the markets.
"OPEC+'s move is modestly positive," says Giovanni Staunovo, an analyst at UBS Group.
The market will focus instead on Iran’s response to Israel’s attacks and the outcome of US elections, he adds.
Oil markets have largely ignored the ongoing conflict in the Middle East for over a year, including the recent retaliatory attack by Israel on Iran, and traders are increasingly convinced that oil supplies from this region will remain undisturbed.
