Opec+ on Sunday agreed to another output hike for November as the supergroup of oil producers continued to unwind production cuts implemented two years ago.
The group, which includes Saudi Arabia, Russia, Iraq, UAE, Kuwait, Kazakhstan, Algeria, and Oman, decided to raise production by 137,000 barrels per day for next month, similar to the October levels of increase, Opec+ said in a statement on Sunday.
The group said the "steady global economic outlook and current healthy market fundamentals" were the reasons for the move.
It also reaffirmed the importance of "adopting a cautious approach and retaining full flexibility to pause or reverse the additional voluntary production adjustments, including the previously implemented voluntary adjustments of the 2.2 million barrels per day announced in November 2023".
This will be the eighth consecutive month that Opec+ is boosting production as it focuses on regaining market share and supporting the growth of its economies.
In September, it completed the unwinding of 2.2 million bpd of cuts that were first announced in November 2023 and implemented starting in April this year.
The group is currently unwinding 1.65 million bpd of voluntary cuts announced in April 2023. For the month of October, the group approved adding about 137,000 bpd.
The eight countries also confirmed their intention to fully compensate for any overproduced volume since January 2024. They will also hold monthly meetings to review market conditions, conformity and compensation, the statement said.
The group will meet next on November 2 to decide on December production levels.
Oil prices have remained volatile this year with a number of factors impacting their trajectory, including geopolitical tensions in the Middle East, continued war between Ukraine and Russia and tariffs unveiled by US President Donald Trump that had a negative impact on oil prices.
Oil prices settled higher on Friday but posted a weekly loss of 8.1 per cent over expectations that Opec+ will raise output, adding to a glut in crude supplies.
Both the benchmarks ended the week 0.66 per cent higher. While Brent, the benchmark for two-thirds of the world's oil, closed at $64.53 a barrel, West Texas Intermediate, the gauge that tracks US crude, touched $60.88.
For the week, Brent fell 8.1 per cent, the largest weekly loss in over three months. WTI tumbled 7.4 per cent in the week.
US President Donald Trump is also increasing pressure on countries to the buying Russian oil and curtail its oil revenue.
During a meeting with Turkish President Recep Tayyip Erdogan at the White House last week, Mr Trump criticised Ankara for buying Russian oil while Moscow is waging war against Ukraine.
“I'd like to have him stop buying any oil from Russia while Russia continues this rampage,” Mr Trump told reporters, alongside Mr Erdogan in the Oval Office.
Mr Trump also criticised India for buying Russian oil and imposed an additional 25 per cent tariffs on India as a penalty for New Delhi’s continued purchase of Russian oil.
There are also growing concerns of oversupply in the market as Opec+ continued to boost production.
The International Energy Agency has in recent months predicted that world oil supply will rise more rapidly than expected this year.
Adding to supply pressures, Iraq’s Kurdish crude exports through Turkey’s Ceyhan terminal also resumed for the first time since 2023.
Oil prices fell at the start of the week on concerns related to oversupply in the market, as Opec+ boosts production and Iraq's Kurdish crude re-enters the market.
However, Vandana Hari, chief executive of Singapore-based Vanda Insights, downplayed oversupply concerns.
She told The National this week that the market is not “seeing the glut and it’s not evident yet in the physical market … it’s exaggerated”.
She said demand for crude remains strong as a result of a combination of factors, including limited diesel exports from Russia amid Ukraine attacks on its refineries and China stockpiling crude.
Winter season boosts on demand for heating oil are also expected.
