OPEC+ delays production boost as weak demand hits prices

OPEC+ announced on Sunday that it will delay the planned increase in oil production for December by one month, as reported by Reuters. This decision was made in response to weakening oil demand, particularly from China, and an increase in supply from outside the group, which is exerting downward pressure on market prices.

This led to an increase in market prices. Brent crude was priced at $74.39 on Monday morning, reflecting a 1.74% increase.

Oil prices closed slightly above $73 per barrel on Friday, partly due to the anticipation of another delay in OPEC+'s production increase.

Eight OPEC+ countries were scheduled to increase production in December. It was part of the group's plan to gradually lift the latest production restrictions, which included a reduction of 2.2 million barrels per day. However, Reuters reported that weak demand and economic data sparked concerns among member countries about introducing additional supply.

The group decided to extend the production reduction for another month, until the end of December, as stated in the OPEC announcement.

The statement also emphasized the collective commitment of member countries to fully adhere to the established production targets. OPEC+ had previously postponed the production increase from October due to falling prices, weak demand, and rising supplies, according to Reuters.

The planned increase for December was set at 180,000 barrels per day, a small fraction of the total 5.86 million barrels per day that OPEC+ is withholding, equivalent to about 5.7% of global demand. OPEC+ has agreed to these cuts in separate stages since 2022.

Weakening fuel demand in China and increasing oil supplies from the U.S. are putting pressure on global raw material prices, prompting OPEC+ to delay increasing oil supplies for now.

"Market conditions prevailed," says Harry Tchilinguirian, head of oil market research at Onyx Commodities Ltd.

"OPEC+ shows that it cannot dismiss the current macroeconomic realities centred around the economies of China and Europe, where a weaker increase in oil demand is evident," he adds.

Analysts suggest that OPEC+'s actions are moderately positive for the markets.

"OPEC+'s move is moderately positive," says Giovanni Staunovo, an analyst at UBS Group.

"The market will instead focus on Iran's response to Israeli attacks and the outcome of the U.S. presidential elections," he adds.

Oil markets have largely ignored the ongoing conflict in the Middle East for over a year, including the recent retaliatory strike by Israel on Iran, with traders increasingly confident that oil supplies from this region will remain unaffected.