Despite signs that the oil market may face a surplus, OPEC+ has decided not to alter its plan to gradually restore oil production by the end of the year. Following an online meeting of the supervisory committee of its 23 members, the alliance announced no changes to its existing strategy. OPEC+ plans to initiate a series of monthly production increases, aiming to boost output by 180,000 barrels per day in December, delayed by two months due to fragile market sentiment.
Recent geopolitical tensions have influenced oil prices. Following an attack on Israel by OPEC member Iran, leading to escalating conflicts in the Middle East, oil prices have surged over 5% in the past two days. However, at approximately $75 per barrel, the price remains 14% lower than in July, as traders focus on weak market demand and increased supply from the Americas.
The drop in oil prices offers relief to consumers struggling with inflation and central banks leaning towards interest rate cuts. However, it also exerts economic pressure on OPEC and its allies. Saudi Arabia recently adjusted its growth forecast downward and predicted a higher budget deficit than previously estimated due to the economic reform costs exceeding revenue.
The recent Joint Ministerial Monitoring Committee (JMMC) meeting primarily addressed issues related to Iraq, Kazakhstan, and Russia not fulfilling their production cut commitments. Although these countries reaffirmed their commitment to the agreement, they continue to exceed their production quotas and have not yet commenced additional cuts to compensate for previous overproduction.
