Oil prices experienced a rebound on Wednesday following a report suggesting that the Organization of the Petroleum Exporting Countries (OPEC) and its allies may postpone a planned increase in production slated for December. Reuters, citing three unnamed sources, reported that the OPEC+ group is considering delaying its production hike by one month due to concerns over weak demand and rising oil supply.
As of the latest trading session, West Texas Intermediate (WTI) crude oil was priced at $68.89 per barrel on the New York Mercantile Exchange, marking a 2.5% increase from the previous close. Similarly, Brent crude traded at $72.38 per barrel on the Intercontinental Exchange, up 2.3% from the prior session. This uptick comes after two consecutive days of losses, during which prices plummeted by as much as 6% following Israel’s limited military action against Iran over the weekend.
OPEC+ Production Decisions
Insiders indicated that the oil market is not “healthy enough” to support the planned production increase in December. Two of the sources, familiar with ongoing discussions within OPEC+, suggested that the proposed increase could be delayed by at least one month. The third source, an OPEC+ delegate, did not specify a timeline for any potential delay. The news of a possible production hold led to a positive reaction in oil prices, alleviating market concerns about oversupply, especially as demand continues to weaken, particularly in top importer China.
OPEC is scheduled to increase its oil production by 180,000 barrels per day starting in December. Saudi Arabia, as the de facto leader of OPEC+, has signaled its willingness to accept lower oil prices to reclaim market share. The group has maintained voluntary production cuts totaling 2.2 million barrels per day since the start of the year, in addition to a broader cut of 3.6 million barrels per day that has been in effect since late 2022. Collectively, these measures represent nearly 6% of the global oil supply.
US Inventory Trends
In the United States, crude oil inventories fell unexpectedly in the week ending October 25, further boosting market sentiment. According to data from the US Energy Information Administration (EIA), oil inventories decreased by 573,000 barrels last week, contrasting with the previous week’s increase of 1.6 million barrels. This decline in inventory levels supported price recovery.
Additionally, private data from the American Petroleum Institute (API) also reported a decrease in US oil stockpiles, confirming a drop of 573,000 barrels. Refined products similarly saw declines, with distillate and gasoline inventories falling by 1.46 million barrels and 282,000 barrels, respectively, according to API data.
The combination of OPEC+ production concerns and falling US inventories has created a more favorable environment for oil prices, signaling a potential stabilization in the market.
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