Background on OPEC+ and its Relevance
OPEC+, comprising the Organization of the Petroleum Exporting Countries (OPEC), Russia, and several smaller producers, has been a significant force in the global oil market. The group’s decisions on production levels have substantial implications for worldwide crude supply and, consequently, oil prices. The recent announcement by OPEC+ to increase production signifies a shift in strategy after years of output cuts.
OPEC+ Production Increase Announcement
On Sunday, OPEC+ announced that it will raise its crude oil production by 137,000 barrels per day (bpd) starting in November. This modest monthly increase mirrors the adjustment made in October, reflecting ongoing concerns about an impending oversupply situation.
This year, OPEC+ has already lifted its oil production targets to over 2.7 million bpd, which accounts for approximately 2.5% of global demand.
The policy shift aims to regain market share lost to competitors, such as U.S. shale producers.
Differing Views Among Key Members
Prior to the meeting, Russia and Saudi Arabia—the two largest OPEC+ producers—held contrasting views, according to sources consulted.
Russia advocated for a minor production increase, similar to October’s adjustment, to prevent putting pressure on oil prices and due to difficulties in raising production amidst sanctions related to its war in Ukraine, sources said.
Saudi Arabia reportedly favored a more substantial increase—doubling, tripling, or even quadrupling the figure to 274,000 bpd, 411,000 bpd, or 548,000 bpd respectively—because of its spare capacity and desire to regain market share more swiftly, sources indicated before the meeting.
Market Outlook and Recent Price Fluctuations
OPEC+ considers global economic prospects stable, with healthy market fundamentals attributed to low oil inventory levels, as per a statement released on Sunday.
Oil Prices Dip in Recent Week
Although oil prices experienced a slight uptick on Friday, they still fell by over 7% when compared to the week’s start. The Brent crude oil benchmark rose 42 cents, or 0.66%, to $64.53 per barrel. West Texas Intermediate (WTI) crude in the U.S. also increased by 40 cents, or 0.66%, to $60.88 per barrel.
Mexico’s export blend, meanwhile, climbed 32 cents, or 0.56%, to $57.88 per barrel.
Week-over-week, the Mexican blend fell by 9.77%, Brent dropped nearly 8%, and WTI declined by 7.36%.
“Oil prices have stabilized around $60 per barrel after falling more than 7.5% during the week, reaching a 16-week low,” stated Fiona Cincotta, senior market analyst at City Index.
Chevron Refinery Fire
On Friday, a fire broke out at Chevron’s El Segundo refinery in the evening. Although flames were contained to a specific area, it was unclear if production had been affected. Analysts suggested that any potential impact on oil prices might be minimal.
