Opec+ has agreed to delay a planned oil output increase for October and November, the producers group said on Thursday after crude prices hit their lowest in nine months, adding that it could further pause or reverse the hikes if needed.
Oil prices have been falling along with other asset classes on concerns about a weak global economy and soft data from China, the world’s biggest oil importer.
Eight members of Opec+, which is made up of the Organisation of the Petroleum Exporting Countries and allies led by Russia, that had been scheduled to raise output 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 over $1 a barrel, with Brent futures trading over $74 before paring gains. It fell to its lowest this year on Wednesday.
Opec+’s planned October hike was for 180,000 bpd, a fraction of the 5.86 million bpd of output it is holding back, equal to about 5.7 per cent of global demand, to support the market due to uncertainty about demand and rising supply outside the group.
Last week, Opec+ was set to proceed with the increase. But fragile oil market sentiment over the prospect of more supply from Opec+ and an end to a dispute halting Libyan exports, coupled with a weakening demand outlook, raised concern within the group, sources said.
Opec+ ministers hold a full meeting of the group to decide policy on Dec. 1. A group of top Opec+ ministers called the Joint Ministerial Monitoring Committee that can recommend changes gathers on Oct. 2.
China concern
A dispute between rival factions in Opec producer Libya over control of the central bank that led to a loss of at least 700,000 bpd of production has supported oil in recent weeks.
Prices, however, slumped by about 5 per cent 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 prudent for Opec+ to wait until December before returning extra barrels.
The planned October increase was set to come from the eight Opec+ members who had agreed in June to start unwinding the cut of 2.2 million bpd – the group’s most recent layer of output cuts – from October 2024 to September 2025.
Opec’s statement on Thursday said after the end of November, this cut will be gradually phased out on a monthly basis starting on Dec. 1 until November 2025, “with the flexibility to pause or reverse the adjustments as necessary.”
The remaining Opec+ cuts of 3.66 million bpd, agreed in earlier steps, are staying in place until the end of 2025.