Several OPEC+ members, including Saudi Arabia and Russia, announced on Thursday an extension of their oil production cuts until the end of November, delaying the reopening of the valves in the face of the recent price drop. The eight countries “have agreed to extend their additional voluntary production cuts of 2.2 million barrels per day for two months”the alliance said in a statement.
Saudi Arabia, Russia, Iraq, the United Arab Emirates, Kuwait, Kazakhstan, Algeria and Oman want to avoid a rout in the markets, which are nervous about a series of negative economic signals. Oil prices have recently fallen, with the American WTI plunging below $70 and Brent at its lowest level since December. In this context, OPEC+ has decided not to reopen the taps of black gold until December 1, 2024, and this “gradually on a monthly basis”reserving the right to “suspend these adjustments or reverse course if necessary”.
At the beginning of June, during the group’s last ministerial meeting, OPEC and its allies had announced their intention to increase their production as early as October. The alliance had, however, taken care to leave itself an exit door, insisting several times on the fact that this decision could be reviewed at any time. According to analysts, this two-month postponement “might not be enough to bring it back up” crude oil prices, Ipek Ozkardeskaya, at Swissquote, points out in a note. Investors are indeed showing “increasingly concerned about weakening demand prospects due to the deteriorating global macroeconomic situation”.
China, the world’s second-largest consumer and the main driver of global oil demand growth, has been a focus for investors since growth slowed in the second quarter. And in the United States, recession fears are resurfacing with each new gloomy economic indicator.
