Oil prices rise after cartel delays plans to increase output

Oil prices rose by more than 2 per cent after the Opec+ production cartel again delayed plans to increase output.
Eight members of Opec+, which includes the Organisation of the Petroleum Exporting Countries along with Russia and other allies, said they would prolong production cuts by another month, having previously said they would lift output by 180,000 barrels per day in December.
The increase was part of a plan to gradually unwind production cuts of 2.2 million barrels per day over 2025.
Although the decision, which was announced on Sunday, was widely expected because the oil price has fallen recently thanks to disappointing demand in Asia, the price of oil on Monday nevertheless jumped by more than $1.93 per barrel, or 2.6 per cent, to $75.07 a barrel by 6pm.
The group had already delayed bringing in the increase from October because of sliding oil prices. At the same time, tensions in the Middle East have not escalated, further depressing prices.
Last week Israel targeted Iran in a missile attack, although it avoided the country’s oil and nuclear facilities. In response Iran’s supreme leader, Ali Khamenei refrained from announcing an immediate retaliation only warning that the attacks should not be “exaggerated or downplayed”, prompting oil prices to drop by about 6 per cent on the day.
Analysts at BNP Paribas said that unless the group changed its strategy the first opportunity to unwind its cuts might not come until the third quarter of next year when crude markets are seasonally strongest. Until then markets are unlikely to be strong enough to justify unwinding production cuts, the analysts said.
Saudi Arabia logged a budget deficit of 30 billion riyals (£6 billion) in the third quarter, a finance ministry statement showed on Monday, as lower oil prices weighed on revenue.
Alongside the announcement of the delay, Opec added that it also noted recent statements made by Iraq, Russia and Kazakhstan in which they reaffirmed their commitment to the production cuts.
There has been renewed focus on some countries’ compliance with the production curbs, particularly that of Iraq and Kazakhstan, which have produced above targets and have committed themselves to additional cuts as compensation.
The BNP Paribas analysts said that although evidence showed that compliance by the two countries had improved, both were still considerably far from implementing compensation cuts. They added that evidence showed that production in Kazakhstan was already starting to rebound following the early completion of upstream maintenance.
Despite the delay, the remaining Opec+ cuts of 3.66 million barrels per day will stay in place until the end of 2025, in line with an agreement in June this year. Ministers of the group of countries will hold a full meeting to decide policy for next year on December 1.