The Organisation of Petroleum Exporting Countries and its allies (OPEC+) on Thursday, September 5, agreed to pause its planned oil output hike for two months after the benchmark Brent crude futures crashed to a 14-month low earlier this week amid fragile demand and plentiful supply, especially after the Libya deal resolution reports.
OPEC’s key coalition members will not proceed with the scheduled hike of 180,000 barrels per day (bpd) in October. OPEC is holding back a fraction of the 5.86 million bpd of output, equal to about 5.7 percent of global demand, to support the market due to uncertainty about demand and rising supply outside the group.
The decision came after downbeat economic data from China and the US — the biggest consumers — sent crude prices below $72 a barrel earlier this week, reaching the lowest since late 2023. 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, have raised concern within the group.
After years of rampant inflation, the delay in supply to support oil market comes as a relief to consumers, but leaves prices too low for the Saudis and others in the OPEC cartel to cover their government spending. Led by Saudi Arabia and Russia, OPEC had decided in June to gradually restore supplies halted since 2022. The planned October increase was set to come from OPEC+ members who agreed to start unwinding the group’s most recent layer of output cuts—a cut of 2.2 million bpd by eight countries—from October 2024 to September 2025. The remaining cuts of 3.66 million bpd, agreed in earlier steps, will remain in place until 2025.
However, OPEC has since repeatedly stressed that the increases could be “paused or reversed” if necessary. A major output disruption in Libya had seemed to offer the group space to proceed, but members are now leaning toward caution.
Even at the start of this week, OPEC delegates had signalled that the scheduled boost remained on track. Last week, output in member Libya was slashed in half after authorities in the eastern region shuttered more than 500,000 barrels a day in a clash with the Tripoli-based government over control of the central bank.Led by Saudi Arabia and Russia, OPEC had decided in June to gradually restore supplies halted since 2022. The planned October increase was set to come from OPEC+ members who agreed to start unwinding the group’s most recent layer of output cuts—a cut of 2.2 million bpd by eight countries—from October 2024 to September 2025. The remaining cuts of 3.66 million bpd, agreed in earlier steps, will remain in place until 2025.
However, OPEC has since repeatedly stressed that the increases could be “paused or reversed” if necessary. A major output disruption in Libya had seemed to offer the group space to proceed, but members are now leaning toward caution.
Even at the start of this week, OPEC delegates had signalled that the scheduled boost remained on track. Last week, output in member Libya was slashed in half after authorities in the eastern region shuttered more than 500,000 barrels a day in a clash with the Tripoli-based government over control of the central bank.Led by Saudi Arabia and Russia, OPEC had decided in June to gradually restore supplies halted since 2022. The planned October increase was set to come from OPEC+ members who agreed to start unwinding the group’s most recent layer of output cuts—a cut of 2.2 million bpd by eight countries—from October 2024 to September 2025. The remaining cuts of 3.66 million bpd, agreed in earlier steps, will remain in place until 2025.
However, OPEC has since repeatedly stressed that the increases could be “paused or reversed” if necessary. A major output disruption in Libya had seemed to offer the group space to proceed, but members are now leaning toward caution.
Even at the start of this week, OPEC delegates had signalled that the scheduled boost remained on track. Last week, output in member Libya was slashed in half after authorities in the eastern region shuttered more than 500,000 barrels a day in a clash with the Tripoli-based government over control of the central bank.The disruption came on top of the halt of Libya’s biggest oil field, Sharara, earlier in August. But on Tuesday, Sadiq Al-Kabir — the central bank governor whose attempted ouster precipitated the crisis — said there were “strong” indications political factions are nearing an agreement to overcome the current deadlock.
Brent futures plunged five per cent to hit a 14-month low on Wednesday when OPEC officials said that discussions on delaying the group’s supply hike were in progress. While global crude markets are currently tight due to summer’s driving demand, they’re set to ease significantly once the seasonal peak in consumption passes.
Data from China has shown critical engines of economic growth sputtering, with factory activity contracting for a fourth month and the value of new-home sales declining. US manufacturing activity showed a fifth consecutive month of contraction.OPEC+ ministers hold a full group meeting to decide policy on December 1. A group of top OPEC+ ministers called the Joint Ministerial Monitoring Committee (JMMC) that can recommend changes will meet on October 2.
