OPEC+ agrees two-month delay in October oil production increase

OPEC+ agreed to postpone a planned increase in oil production for October and November, the producers' group announced on Thursday, after crude prices fell to their lowest level in nine months. It added that it may further pause, or reverse, the increases if necessary.

Oil prices are falling, along with other asset categories. This is due to concerns over a weakening global economy as well as soft data coming from China, which is the world's largest oil importer.

Eight members of OPEC+ (which is composed of the Organization of the Petroleum Exporting Countries, and its allies, led by Russia), who were scheduled to increase output in October, held a virtual conference on Thursday.

OPEC announced that eight countries had agreed to extend the voluntary additional production cuts by 2.2 million barrels a day for an extra two months, until November 2024.

Brent futures traded at over $74 before the news dragged down gains. On Wednesday, it fell to its lowest level of the year.

OPEC+ planned to raise prices in October by 180,000 bpd. This is a fraction from the 5,86 million bpd it has held back to support the global market, due to the uncertainty surrounding demand and the rising supply outside of the group.

Last week, OPEC+ announced that it would increase production. Sources said that the fragile oil market sentiment, a result of the prospect of increased supply from OPEC+, and the end of a dispute halting Libyan imports, along with a weakening outlook for demand, caused concern among the group.

OPEC+ Ministers meet in full to discuss policy decisions on December 1. On Oct. 2, a group of top OPEC+ Ministers, called the Joint Ministerial Monitoring Committee (JMC), that can make recommendations for changes, gathers.

CHINA CONCERN

In recent weeks, oil prices have been supported by a dispute between rival factions of OPEC producer Libya about control of the central banks that resulted in a loss at least of 700,000 bpd in production.

On Tuesday, prices fell by around 5% as a result of the news that the a

possible deal

A deal to end the conflict is in the works. However, no agreement on the resumption of exports has yet been announced.

A slump in global margins for refining, which could lead refiners into processing less crude oil, has also been a factor.

Helima Croft, an analyst at RBC Capital, said in a recent note that it might be prudent for OPEC+ not to return extra barrels until December.

The eight OPEC+ member countries who agreed in June to begin unwinding their most recent layer output cuts – of 2.2 millions bpd – from October 2024 until September 2025 were expected to make the planned increase for October.

OPEC said in a statement Thursday that after the end November, the cut would be phased out gradually on a month-to-month basis beginning on December 1 until November 2025. "With the flexibility to pause, or reverse, the adjustments as needed."

The OPEC+ reductions of 3,66 million bpd agreed earlier will remain in place until 2025.

(source: Reuters)