The OPEC+ oil alliance has blinked, delaying a planned easing of production cuts as global oil prices continue to slump.
Confirmation of this decision caused oil prices to briefly reverse their downward trend on Thursday. US crude futures rose above $70 a barrel, but then fell back below that level later in the session and into early Asian trading on Friday.
Prices for US crude were still below $70 a barrel just before 7 AM Sydney time. November Brent was around $72 a barrel, down from earlier highs of over $73.
Well-connected sources informed Western news agencies on Thursday about the change of heart, which will mean a delay in plans to increase production by 180,000 barrels a day in October. This plan would have added 2.2 million barrels a day to the market over the next few months.
Now, the first step is reportedly delayed by two months until December, meaning it won't start until early 2025, if at all, according to an OPEC statement issued late Thursday.
The 2.2 million bpd cut, implemented over the second and third quarters, was due to expire at the end of this month. It was undertaken by Algeria, Iraq, Kazakhstan, Kuwait, Oman, Russia, Saudi Arabia, and the United Arab Emirates as a voluntary reduction outside the official policy binding all OPEC+ members.
The OPEC Secretariat confirmed that these eight nations would extend their 2.2 million bpd output cuts, with the phase-out of these curbs now due to start in December this year and stretching to November 2025.
The postponement of the additional barrels to global supply is an admission by OPEC that its optimistic view of the global economy is out of sync with reality. OPEC has been anticipating an additional 2 million barrels a day in demand, while the International Energy Agency has estimated around 1 million or slightly more.
Trade figures for August from China, including the monthly oil import data, will provide more information and are eagerly awaited by traders.
