The Opec+ group of crude oil-producing states has decided to stick to its current output policy as oil prices continue to rise driven by tighter supplies and improving demand prospects.
“The committee will continue to closely assess market conditions, noting the willingness of the DoC [declaration of co-operation] countries to address market developments and stand ready to take additional measures at any time,” the group said after a ministerial monitoring committee meeting on Wednesday.
Oil prices have rallied this year, gaining about 22 per cent in the third quarter of this year alone.
This trend is expected to continue in the last quarter of this year, with the International Energy Agency predicting a tighter-than-expected crude market supported by Opec+ output cuts, as well as signs of accelerating economic momentum in China, the world’s second largest economy.
Last month, Opec+ members Saudi Arabia and Russia announced they would extend their combined supply cuts of 1.3 million barrels per day to the end of the year.
As part of the voluntary output caps, the kingdom is maintaining its output cut of a million bpd until December.
Meanwhile, Russia is rolling over its export cut of 300,000 bpd until the end of 2023.
Goldman Sachs expects Saudi Arabia to unwind its voluntary production cut from the second quarter of 2024.
Meanwhile, Swiss lender UBS does not rule out of a “modest” output increase at the group’s November meeting in Vienna if oil prices keep rising.
“Also, lower domestic demand allows Middle Eastern producers to increase their exports to cover stronger demand, if needed,” UBS said in a research note.
The Opec+ alliance of oil-producing countries does not aim to control prices through output cuts as its objective is less volatility in the market, Saudi Arabia’s Energy Minister said at the World Petroleum Congress in Canada last month.
Prince Abdulaziz bin Salman said that the group wanted to be “proactive” and “pre-emptive” and also added that the group’s conduct was “benign” and no different from actions taken by global central banks to control inflation.
In its latest monthly oil market report, Opec stuck to its oil demand outlook for this year and the next, and said it expects China’s stimulus measures to revive growth in the world's second-largest economy.
The oil producers expect demand to rise by 2.4 million bpd to 102.1 million bpd this year. Next year, world oil demand is forecast to expand by 2.2 million bpd to 104.3 million bpd.
The 23 Opec+ member states have enforced total production curbs of 3.66 million bpd, or about 3.7 per cent of global demand.
This includes a reduction of 2 million bpd agreed on last year, and voluntary cuts of 1.66 million bpd, announced in April and extended to December 2024.
The supply dynamic of the market has been further tightened by Russia’s move to temporarily ban petrol and diesel exports in response to domestic shortages.
The IEA expects a “substantial” crude market deficit in the fourth quarter of this year due to Opec+ output cuts.
The Paris-based agency expects global oil demand to rise by 1.5 million bpd in the second half of this year, compared with the first half, exceeding supply by 1.24 million bpd during that period.