Oil watchers remain divided over whether Opec+ will go ahead with a planned production revival next quarter, as demand fears continue to pressure prices.
Twelve respondents in a Bloomberg survey of traders, refiners and analysts predicted the cartel will proceed, while 11 expect it will postpone the hike. Another five forecast the increase will either be partial, or contingent on a lasting output shutdown in Libya.
Led by Saudi Arabia and Russia, Opec+ provisionally plans to add 543,000 barrels a day in October as it gradually restores output halted since late 2022. The group has stressed on several occasions – most recently on Aug 1 – that hikes can be “paused or reversed” as necessary, and in recent weeks the market outlook has deteriorated amid faltering economic growth in key consumer China.
Several delegates within the Opec+ coalition, who asked not to be identified, said they currently expect the hikes to go ahead, though at least one argued for a need to delay.
Oil prices have slumped 11 per cent since early July, slipping below US$80 a barrel in London, even as a feud between rival governments in Libya shutters 40 per cent of the Opec member’s production. Yet, market watchers are just as uncertain of the cartel’s intentions as they were a month ago, when a poll showed a similar split.
With prices are too low for the Saudis and other key Opec+ nations to fully cover government spending, analysts at Citigroup, Rystad Energy, DNB ASA and BNP Paribas doubt the alliance will increase supplies as scheduled.
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Global oil markets will tip into surplus next quarter if the group opens the taps, according to trading giant Trafigura Group and the Paris-based International Energy Agency. The producers have only “limited scope” to add barrels, BP chief economist Spencer Dale cautioned last week.
A prolonged shutdown of production in Libya could ease the path for fellow members to open the taps. The country’s eastern authorities have slashed output by 400,000 barrels a day, or about 40 per cent, as they spar with the Tripoli-based government for political control.
“The Libyan disruption may have paved the way for the increase to go ahead without hurting prices and sentiment much,” said Ole Hansen, head of commodities strategy at Saxo Bank.
Key members like the United Arab Emirates appear eager to revive supplies and deploy idle capacity. Adding barrels now could make it easier for Opec+ to postpone its next tranche of supply increases early next year, when surging supply from the Americas may present an even bigger surplus.
Opec+ typically finalises output policy a month in advance, meaning confirmation of the fourth-quarter hike could come as early as this weekend. As the current supply restraints are being made by a selection of key members, rather than the whole group, policy is usually announced by the separate countries on state-run media.
The alliance’s market-reviewing body, the Joint Ministerial Monitoring Committee, isn’t due to meet until Oct 2, which would be too late for a decision on shipments loading in October. The panel could still make a recommendation on supply in the final two months of the year. A full ministerial meeting is scheduled for Dec 1. BLOOMBERG
