OPEC+ Considers Delaying Output Increase

By Alex Lawler, Olesya Astakhova, and Ahmad Ghaddar

LONDON (Reuters) – OPEC+ is discussing delaying an oil output increase originally scheduled to start in October after oil prices dropped to their lowest in nine months, according to four sources from the producer group.

This deliberation comes amid concerns about a weak global economy and disappointing data from China, the world’s largest oil importer, which has contributed to falling oil prices and other asset classes.

Previously, OPEC+ planned a 180,000 barrels-per-day output hike in October, as part of a strategy to gradually unwind recent cuts.

However, concerns over fragile oil market sentiment, additional supply from OPEC+, an ongoing dispute affecting Libyan exports, and a weakening demand outlook have raised alarms within the group. One of the sources indicated that a delay is looking “highly possible.”

Following news of the potential delay, oil prices increased, with Brent crude rising over $1 to a session high of $74.80 a barrel, before settling lower at approximately $73, the lowest price since December.

Requests for comments from OPEC and the Saudi government communications office went unanswered.

China Concerns

Recent conflicts between rival factions in Libya over control of the central bank have resulted in a loss of at least 700,000 bpd in production, which has supported oil prices in recent weeks. However, prices surged downwards by roughly 5% on Tuesday, following reports that a resolution to the Libyan conflict may be in progress. Weak demand from China and declining global refining margins, which may compel refiners to process less crude, have also contributed to the price drop.

According to RBC Capital analyst Helima Croft, “China’s underperformance has dented 2024 growth projections and has continued to trail both 2023 crude import and refinery throughput levels.”

Croft advised OPEC+ to consider waiting until December before returning any extra barrels to the market.

Overall, OPEC+ is implementing output cuts totaling 5.86 million bpd, or about 5.7% of global demand, as a measure to support the market amid the uncertain demand outlook and increasing supply outside the organization.

In June, OPEC+ had reached an agreement to extend 3.66 million bpd of these cuts until the end of 2025, along with prolonging the latest cuts—a 2.2 million bpd reduction by eight members—by three months, extending through the end of September 2024. After that, there will be a gradual easing of cuts from October to September 2025.

The anticipated 180,000 bpd output increase in October, which may now face delays, was scheduled to involve the eight OPEC+ members that have been adhering to these recent reductions.