OPEC plans a two-month delay in production increases

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OPEC+ members are close to delaying planned oil output increases for at least two months as weaker-than-expected demand pushes prices to their lowest level this year.

Key members of the producer group, including Saudi Arabia, Russia and the United Arab Emirates, were due to start removing voluntary output cuts from early October, but in recent days have discussed delaying increases, according to people familiar with the deliberations. .

While members have yet to make a final decision, the people said, the group is considering keeping the barriers in place until after OPEC+ members meet in person at their next scheduled meeting in Vienna on Dec. 1. An imminent announcement is expected, they added.

The planned increases would have raised the group’s output by 180,000 barrels a day in October and by 540,000 b/d by the end of the year as part of plans to phase out 2.2 million voluntary cuts over the next 12 months.

“Demand indications of late have been very weak, so I wouldn’t rule out delaying the cut,” said Amrita Sen, director of research at Energy Aspects, a consultancy.

OPEC+ members announced plans to bring back output after their last meeting in June, even as they agreed to extend further output cuts until the end of 2025.

The group, led by Saudi Arabia and Russia, has repeatedly cut oil production in recent years in an attempt to support prices.

Three different sets of cuts mean that OPEC+ members are currently producing nearly 6 million b/d less than their combined capacity, representing about 6% of global supply.

Saudi Energy Minister Prince Abdulaziz bin Salman said in June that the plan to eventually lift some restrictions could be halted at any time if market conditions worsened.

Brent crude closed at $72.70 a barrel on Wednesday, the lowest level since May 2023, as weak demand from China and the possible resolution of a dispute in Libya that has halted oil exports further weighed on prices. On Thursday, it rose 1.5% to $73.76.

Jorge Leon, a former OPEC official now at energy consultants Rystad, said he expected the group to keep production at current levels and reassess next month.

“It would be wise for them to stop for a month and then see what happens in Libya, see what happens in the Middle East and see what happens with the price of oil,” he said.

Helima Croft, head of commodities research at RBC Capital Markets, said it would be “most prudent” for the group to delay the decision longer, until the OPEC+ meeting in December, to allow members to meet and then communicate in person any decision.

“I think the communication mechanism of the public press conference is important for market sentiment,” she said. “Written statements can become a kind of Rorschach test where everyone sees what they want to see in the inkblots of the communique.”