The OPEC+ group of oil-producing nations said Thursday it agreed to delay a planned oil output increase for October and November, after crude prices hit their lowest in nine months. The group also indicated it could further pause or reverse the hikes if needed.
Oil prices have been falling, along with other asset classes, amid concerns about a weak global economy and soft data from China, the world's biggest oil importer.
Eight members of OPEC+, a coalition of the Organization of the Petroleum Exporting Countries and allies led by Russia, had been scheduled to raise output starting in October. They held a virtual meeting on Thursday, OPEC said in a statement.
"The eight participating countries have agreed to extend their additional voluntary production cuts of 2.2 million barrels per day (bpd) for two months until the end of November 2024," OPEC said.
The news lifted oil prices by more than $1 a barrel, with Brent futures trading above $74 before paring gains. Prices fell to their lowest this year on Wednesday.
OPEC+'s planned October hike was for 180,000 bpd, a fraction of the 5.86 million bpd of output it is holding back—equal to about 5.7% of global demand—to support the market amid uncertainty about demand and rising supply outside the group.
Last week, OPEC+ had been set to proceed with the increase. But fragile oil market sentiment, concerns about more supply from OPEC+, and the potential resolution of a dispute halting Libyan exports, combined with a weakening demand outlook, raised concern within the group, sources said.
OPEC+ ministers are scheduled to meet Dec. 1 to decide on policy. A group of top OPEC+ ministers, the Joint Ministerial Monitoring Committee, which can recommend changes, will gather on Oct. 2.
A dispute between rival factions in OPEC producer Libya over control of the central bank that led to a loss of at least 700,000 bpd of production has supported oil in recent weeks.
Prices, however, slumped by about 5% on Tuesday on news that a possible deal to resolve the conflict was in the works, although no deal on resuming exports has been announced.
Weak Chinese demand and a slump in global refining margins which could prompt refiners to process less crude, have also weighed.
RBC Capital analyst Helima Croft said in a note that it may be prudent for OPEC+ to wait until December before returning extra barrels.
The planned October increase was set to come from the eight OPEC+ members who had agreed in June to start unwinding the cut of 2.2 million bpd - the group's most recent layer of output cuts – from October 2024 to September 2025.
OPEC's statement on Thursday said after the end of November, this cut will be gradually phased out on a monthly basis starting on Dec. 1 until November 2025, "with the flexibility to pause or reverse the adjustments as necessary."
The remaining OPEC+ cuts of 3.66 million bpd, agreed in earlier steps, are staying in place until the end of 2025.
