OPEC+ is preparing to implement a planned increase in oil production starting in October, according to multiple sources familiar with the group's strategy. The decision comes amid fluctuating oil prices and significant production losses from Libya, which have impacted the global oil market.
Beginning next month, eight OPEC+ members will raise their output by 180,000 barrels per day (bpd). This increase is part of a broader strategy to reverse a portion of the group's previous production cuts totaling 2.2 million bpd. The plan aims to gradually unwind these cuts while maintaining other reductions through the end of 2025. The decision to proceed with the output hike reflects the group's efforts to balance market dynamics and address evolving supply and demand factors.
The move comes despite a slowdown in global oil demand, particularly in China, which has led to concerns about the timing and necessity of the planned increase. Brent crude prices fell by approximately 1.5% following the announcement, trading at around $78.81 per barrel. West Texas Intermediate (WTI) also experienced a decline, dropping to $73.92 per barrel. "There are many uncertainties on demand but there is also the hope that the Fed's interest rate cut will boost economic growth," one source told Reuters.
Libya's recent production disruptions have played a significant role in OPEC+'s decision to move forward with the output increase. Political instability within Libya has resulted in a substantial reduction of approximately 700,000 bpd, as the country's eastern government has shut down oil fields amid escalating internal conflicts. This loss provides some breathing room for OPEC+ members to increase their production without significantly altering the overall global oil supply.
Despite the ongoing market volatility, OPEC+ sources indicated that the group's planned increase in output for October will be assessed on a month-to-month basis. This flexibility allows OPEC+ to respond to changing market conditions and adjust its strategy as necessary. The Joint Ministerial Monitoring Committee (JMMC) of OPEC+, which is set to meet on October 2, will play a key role in reviewing the group's output policy and making recommendations to the broader OPEC+ coalition.
The potential for a U.S. Federal Reserve interest rate cut in mid-September is also a factor in OPEC+'s decision-making process. A reduction in interest rates could potentially stimulate economic growth and, in turn, boost oil demand. OPEC+ members are hopeful that such monetary policy adjustments will contribute to a more favorable market environment for oil prices.
Goldman Sachs has reported a mixed outlook on oil prices and market conditions. The bank has indicated that the oil market remains in a state of flux, with geopolitical uncertainties and economic indicators influencing price movements. The recent turmoil in Libya has added to the complexities facing oil producers and consumers alike.
