After turning away from $100-per-barrel oil in June, OPEC+ now confronts the task of establishing a stable floor around $75 per barrel. Although Saudi Arabia, Russia, and their coalition partners can uphold this threshold in the short term, maintaining it beyond late 2024 into the following year may pose significant challenges.
In a strategic shift earlier this year, OPEC+ members agreed to gradually increase oil supply on a monthly basis starting in October, with provisions for adjustments based on market conditions. However, market sentiments have interpreted this move as a signal towards potentially lower prices. Consequently, OPEC+ anticipates boosting output by 500,000 barrels per day by December, reaching approximately 1.8 million barrels by mid-2025.
Despite these efforts, market realities have not aligned with OPEC+’s expectations. Brent crude recently dipped to $75.05 per barrel, marking its lowest point since January and falling notably below pre-meeting price levels. This disparity underscores the challenge faced by Saudi Arabia and its allies in maintaining the $75 price floor.
Looking ahead, OPEC+ encounters hurdles in sustaining oil prices above $75 amidst increasing global oil demand and persistent supply issues. Non-OPEC production, particularly from the Americas, continues to rise, meeting the growing global consumption levels. Moreover, several OPEC+ members are exceeding their production limits, further complicating the market dynamics.
As the Northern Hemisphere summer concludes, a seasonal downturn in oil demand is expected, coinciding with OPEC+’s scheduled increase in production from October onwards. This influx of supply could potentially tip the market into oversupply territory, undermining efforts to stabilize prices at $75 per barrel. Delays in production increases could offer temporary defense of this price level but might necessitate strategic adjustments.
Looking ahead to the first half of 2025, OPEC+ faces continued challenges. Despite robust growth in oil demand, the group may find it difficult to ramp up production to meet these demands, possibly requiring further strategic adjustments. While $75 per barrel may hold as a price level temporarily, its sustainability remains uncertain in the medium term.
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