OPEC+ delays production increase

The OPEC+ countries that have been making additional voluntary cuts agreed to delay returning production by two months in an unscheduled meeting. Output was meant to be moving higher from October 2024 and over the course of the year into the end of 2025 but now that process will only begin in December. Production levels at the end of 2025 are unchanged from what had been agreed in June this year when the production cut phase-out was initially announced.

The delay looks to have been a response to the sell-off in oil that has taken hold over the last few months and the deteriorating macro conditions for oil demand for the remainder of 2024 and for potentially the early months of 2025. As we noted previously, OPEC+ had given itself the room to adjust their production plans based on market conditions and in their latest statement on September 5, the grouping of countries making the voluntary adjustments said they would maintain the “flexibility to pause or reverse the adjustments as necessary.”

The statement also again stressed the need for those countries that have “overproduced” to make compensatory adjustments, highlighting in particular Iraq and Kazakhstan which have missed production targets sine the start of the year. Both countries will reportedly put more fields on maintenance as well as cancelling sales that had been agreed in August.

The delay to production increases was widely expected by markets and immediate price reaction has been limited. Brent futures are holding just under USD 73/b while WTI remains below USD 70/b. Slowing down the pace of increase will likely help to set a floor under prices rather than necessarily spark a bump in oil back up to USD 80/b for Brent in the short term. For a more sustained rally in oil markets, positive signals would need to come from the demand side of balances.