OPEC+ delays production boost as demand weakens and prices rise

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

This decision caused a rise in market prices. Brent crude was priced at $74.39 on Monday morning, reflecting an increase of 1.74%.

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

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

The group decided to extend the reduction in production 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 comply with 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 to be 180,000 barrels per day, which is a small fraction of the total 5.86 million barrels per day that OPEC+ is withholding, equivalent to about 5.7% of the world's demand. OPEC+ agreed to these cuts in separate stages since 2022.

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

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

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

Analysts indicate 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 attack by Israel on Iran. Traders are increasingly convinced that oil supplies from this region will remain undisturbed.