OPEC+ has decided to delay its planned production increase initially scheduled for December by one month, marking the second postponement amid continuing struggles with oil prices and an uncertain economic forecast. The coalition, led by Saudi Arabia and Russia, had proposed a monthly production boost of 180,000 barrels a day starting in December. However, according to a statement on OPEC’s website released on Sunday, they will continue to limit supply through the end of that month.
Previously, the resumption had been deferred from October due to weakening demand in China and increasing output from the Americas, influencing price pressures. Brent crude futures have decreased by 17% over the past four months and are trading around $73 a barrel, a price considered insufficient for the fiscal requirements of Saudi Arabia and other OPEC+ members.
Harry Tchilinguirian, head of oil research at Onyx Commodities Ltd., stated that market conditions influenced this decision, as OPEC+ could not ignore the macroeconomic realities reflecting weaker oil demand growth in China and Europe. Although the additional postponement could have limited impact on the market, having been widely anticipated by traders, the International Energy Agency in Paris predicts that global markets will still face oversupply next year even if the OPEC+ alliance maintains restrained output. Citigroup Inc. and JPMorgan Chase & Co. foresee prices dipping into the $60s by 2025.
Giovanni Staunovo, a UBS Group AG analyst in Zurich, described the OPEC+ action as “modestly positive,” stating that market attention will instead focus on Iran’s reaction to Israel’s attacks and the outcome of U.S. elections. Recently, traders have generally dismissed the impact of a year of Middle Eastern conflicts, including Israel’s recent military actions against Iran, confident that oil exports from the region will stay uninterrupted.
The current pricing level represents a challenge for Riyadh, which, as per the International Monetary Fund, requires around $100 a barrel to support Crown Prince Mohammed bin Salman’s extensive economic plans. Russia’s President Vladimir Putin, a close oil-market ally, also needs revenues to continue the conflict with Ukraine.
Amrita Sen, director of research at Energy Aspects Ltd., emphasized that the significance lies more in market sentiment than precise figures. She noted that the market had incorrectly assumed OPEC+ was eager to regain market share by flooding the market when their main focus was actually on managing oil inventories.
In June, the Organization of Petroleum Exporting Countries and its partners outlined a gradual approach to restoring 2.2 million barrels a day originally withheld over the past two years. However, worsening market fundamentals, including a four-month contraction in Chinese demand and increased supply from the U.S., Brazil, Canada, and Guyana, have obstructed these plans. U.S. oil production achieved a new monthly record of 13.4 million barrels a day in August.
Jorge Leon, senior vice president at Rystad Energy AS, indicated that considering the geopolitical tensions in the Middle East and the forthcoming U.S. presidential elections, it appeared reasonable for OPEC+ to extend the voluntary cuts for another month.
OPEC+ has faced challenges in ensuring compliance from some member nations—specifically Russia, Iraq, and Kazakhstan—with their agreed production cuts. These nations have pledged to better adhere to the agreements and make further reductions to compensate for past overproduction. Nevertheless, they have often exceeded their quotas.
The 23-member alliance is set to convene on December 1 to evaluate their strategy for 2025.
