OPEC+ faces market headwinds

Key takeaways:

– In June, OPEC+ announced plans to gradually release some of their voluntarily withheld barrels. However, due to unfavorable market conditions—particularly weak demand from China and robust non-OPEC+ supply growth led by the U.S.—the group was compelled to delay the production increase twice. With today’s widely anticipated decision, this marks the third postponement.

– Moreover, the return of the withheld barrels will occur at a slower pace, extending over 18 months instead of the initially planned 12 months.

– Current market fundamentals do not support OPEC+ releasing additional barrels in the near future. According to the International Energy Agency (IEA), even if OPEC+ refrains from releasing any barrels in 2025, the market is projected to face a surplus, exerting downward pressure on oil prices.

– The delay also provides OPEC+ with the opportunity to assess potential scenarios, particularly geopolitical developments that could directly and indirectly influence oil markets. Key factors include the potential return of Donald Trump to the U.S. presidency in January and his policies on Iran (a return to maximum pressure?), China (renewed trade tariffs?), and Russia (a possible peace deal?), as well as gaining clearer insights into economic trends, especially in China.