OPEC is expected to continue delaying the restoration of supply, but can this save oil prices?

According to the latest report from Bloomberg, considering the weak global oil demand will put pressure on oil prices, OPEC+ may again postpone its plan to resume production increases at the December meeting, possibly delaying it until the second quarter of next year.

For months, OPEC has been seeking to gradually restore the supply that has been halted since 2022, but the plans have repeatedly been shelved. Analysts expect that the original plan to increase production by 180,000 barrels per day in January next year may be postponed until the second quarter. The report states that OPEC has not yet initiated formal discussions ahead of the meeting, but alliance representatives have indicated that given the current market conditions, delaying the production increase is necessary.

Since early July, crude oil prices have fallen by 15%. Currently, Brent crude futures are trading close to $73 per barrel.

The low oil price trend has posed a financial threat to OPEC and its partners. The International Monetary Fund (IMF) stated:

“Saudi Arabia needs prices close to $100 per barrel to fund its ambitious economic transformation plan.”

Ole Sloth Hansen, head of commodity strategy at Saxo Bank, stated, “In this situation, the market is simply not sufficient to support an increase in oil production.”

The oversupply situation continues to exist; however, currently, OPEC+ has agreed to gradually restore production by 2.2 million barrels per day starting from January 2025, and the UAE has also been allowed to gradually increase production by 300,000 barrels per day.

According to a previous article from Wall Street Insight, the International Energy Agency (IEA) predicts that even if OPEC+ cancels the production increase plan, the global market will still face a supply surplus next year:

“If OPEC+ continues to push forward with the production recovery plan, the global oil supply surplus will further worsen, with the global oil market facing a surplus of more than 1 million barrels per day by 2025. Production in countries such as the United States, Brazil, Canada, and Guyana will increase by 1.5 million barrels per day this year and next.”

Citigroup analysts also predict that even if OPEC+ cancels the supply increase, crude oil prices will trend towards $60 per barrel by 2025, and if the group continues to increase production, prices may fall further.

JPMorgan believes that even if OPEC+ extends the production cuts, the global oil market will still see a “large” surplus of 1.3 million barrels per day next year, with Brent crude prices expected to be around $73 per barrel in 2025, close to current levels, and prices could drop below $60 per barrel by 2016