OPEC+ May Stick with Deep Oil Cuts for Longer Due to Weak Demand

SEATTLE (Oil Monster): OPEC+ will have little room to manoeuvre on oil policy when it meets in December: it would be risky to increase output because of weak demand, and difficult to deepen supply cuts because some members want to pump more, sources and analysts said.

The Organization of the Petroleum Exporting Countries and its allies led by Russia, the group known as OPEC+, which pumps around half the world's oil, has already delayed a plan to gradually lift production by several months this year.

 It may push back output increases again when it meets on Dec. 1 due to weak global oil demand, according to three OPEC+ sources familiar with the discussions. Ministers last shelved the increase for a month when they met virtually on Nov. 3.

"I can't say it's popular in the group but there would be no strong objection to a delay until the first quarter," one of the OPEC+ sources said, declining to be identified by name.

 Two other OPEC+ sources said it was too early to say what the group will decide. OPEC and the Saudi government communications office did not immediately respond to a request for comment.

OPEC+ had planned to slowly roll back production cuts with small increases over many months in 2024 and 2025. But a slowdown in Chinese and global demand, and rising output outside the group, have put a dampener on that plan.

This has left OPEC+ maintaining output cuts for longer than it had thought. The group has cut output by 5.86 million barrels per day, or about 5.7% of global demand, in a series of steps agreed since 2022 to support the market.

Despite OPEC+'s cuts and delays to output hikes, oil prices have mostly stayed in the $70-$80 per barrel range this year.

Saudi Arabia was keen to address an internal issue of poor compliance with production targets from some OPEC+ members, sources said, before proceeding with any output increase for the group.

Some members including Iraq have reduced output in recent months, so compliance has improved. That could give the group a little room for a coordinated small increase in supply - as long as demand supports it.

Increasing output in a market with little demand growth, however, would risk weakening prices. It is a tactic OPEC+ could use to put pressure on rivals - but one that would also hurt OPEC+ countries that rely on oil revenues.

Many OPEC members need a price of over $70 to balance their budgets and could not sustain a long period of oil below $50.

 Courtesy: www.reuters.com