OPEC+ is set to proceed with a planned oil output hike from October, as Libyan outages and pledged cuts by some members to compensate for overproduction counter the impact of sluggish demand, six sources from the producer group told Reuters.
Unwinding Recent Output Cuts
OPEC+ is moving forward with its plan to boost oil output by 180,000 barrels per day in October, despite concerns over a slowdown in global demand, particularly from China. This increase is part of a broader strategy to gradually unwind a layer of the group’s recent output cuts, which totalled 2.2 million barrels per day, while keeping other production restrictions in place until the end of 2025.
Factors Influencing the Decision
The decision to proceed with the increase is influenced by a significant reduction in Libyan oil production, which has tightened global supply. Additionally, there is cautious optimism within OPEC+ that a potential interest rate cut by the U.S. Federal Reserve in mid-September could spur economic growth and, by extension, oil demand.
Flexibility in Strategy
Despite the uncertainties surrounding demand, especially in key markets like China, OPEC+ remains committed to its current strategy. However, Saudi Arabian Energy Minister Prince Abdulaziz bin Salman has indicated that the group could reconsider the production hikes if market conditions weaken further.
Upcoming JMMC Meeting
The next opportunity for OPEC+ to reassess its strategy will come on October 2, during a meeting of the Joint Ministerial Monitoring Committee (JMMC). This panel can make recommendations to the wider OPEC+ alliance based on the latest market developments.