KEY POINTS
- OPEC+ delayed its oil output increase due to weak demand.
- The 2.2 million barrels per day cut will last until December.
- Brent crude prices remain low despite the postponed increase.
OPEC+ has agreed to postpone a planned oil output increase by one month, the group announced Sunday. Weak demand, particularly from China, and rising oil supply from outside the group are keeping downward pressure on the market.
OPEC+ delays output hike as demand from China weakens
Eight members of OPEC+, which includes the Organization of the Petroleum Exporting Countries and allies like Russia, had been scheduled to raise output in December as part of a gradual easing of the group’s latest production cuts. The cuts, totalling 2.2 million barrels per day (bpd), were intended to help stabilize oil prices. However, weak demand and economic concerns prompted OPEC+ to delay the hike after consultations among ministers.
The eight countries decided to extend the 2.2 million bpd cut until the end of December, OPEC said in a statement. They also reaffirmed their commitment to meet their output targets. Oil prices ended Friday above $73 per barrel, buoyed by expectations of the delay. Despite this, Brent crude remains near its lowest levels of the year, having dipped below $69 in September.
Group extends oil cuts by 2.2 million barrels per day
This is the second time OPEC+ has postponed a planned increase. The group delayed a similar move in October, citing weak prices, falling demand, and rising supply. An easing of concerns about Middle Eastern conflict affecting oil production has also contributed to lower prices.
OPEC and Saudi Arabia maintain that they do not target a specific oil price, instead basing decisions on market fundamentals to balance supply and demand.
The December increase was originally set to be 180,000 bpd, a small fraction of the 5.86 million bpd OPEC+ has held back from the market since 2022. Compliance with these output cuts has been a focus, especially regarding Iraq and Kazakhstan, which have exceeded their targets but pledged to make additional reductions.
OPEC said the eight countries noted Iraq, Russia, and Kazakhstan’s recent commitments to adhere to the OPEC+ agreement, including compensatory cuts for exceeding production limits.
Reuters reports that before the latest postponement, the eight members were due to begin unwinding the 2.2 million bpd cut in December 2024, with further increases planned for next year. The remaining OPEC+ cuts of 3.66 million bpd are set to stay in place until the end of 2025 under a June 2024 agreement.
OPEC+ ministers will meet Dec. 1 to determine the group’s oil policy for 2025.
