(Bloomberg) -- OPEC+ signaled no changes to oil supplies at a monitoring meeting, sticking with tentative plans to start reviving halted production next quarter.
The group led by Saudi Arabia and Russia didn’t issue any specific recommendation at the online session on Thursday, according to delegates who asked not to be identified as the talks are private. This was subsequently confirmed by a statement on the organization’s website.
The Organization of Petroleum Exporting Countries and its allies have agreed that, starting in October, they would gradually begin restoring output that was halted in late 2022 to shore up prices. About 540,000 barrels a day are due to be added over the course of the fourth quarter.
An initial price slump after the plan was announced in June rattled OPEC+ officials, spurring them to stress that supply increases could be postponed or even scrapped altogether at Thursday’s gathering. A statement after the meeting “reiterated that the gradual phase-out of the voluntary reduction of oil production could be paused or reversed, depending on prevailing market conditions.”
Brent futures have remained under pressure amid plentiful supplies from the US, Guyana and Brazil and a faltering economic outlook in China. The international benchmark is trading near $81 a barrel.
While the recent price decline may offer relief for consumers and central banks still smarting from rampant inflation, it potentially spells pain for OPEC+ nations. Saudi Arabia has suffered a four-quarter growth slump, forcing Riyadh to cut investment in flagship economic projects championed by Crown Prince Mohammed bin Salman.
Escalating tensions in the Middle East are another source of uncertainty for the group, which includes exporters such as Iran, Iraq and the United Arab Emirates.
Israel targeted top leaders of Hezbollah near Beirut and Hamas in Tehran within a seven-hour window this week, further inflaming a conflict that has raged since October. The strikes killed Ismail Haniyeh, the political chief of Hamas, and Fuad Shukr, a high-ranking member of Hezbollah.
Fourth-Quarter Outlook
After making no firm decision at the Joint Ministerial Monitoring Committee meeting, OPEC+ can theoretically ponder the scheduled fourth-quarter output boost until early September, when cargo loading dates for customers will likely be finalized. The JMMC will meet again on Oct. 2.
OPEC+ countries have “decided to intensify consultations and to regularly exchange opinions and pay special attention to any developments that could have an impact on the development of market fundamentals,” Algerian Minister of Energy and Mines Mohamed Arkab said in a statement after the JMMC.
Oil traders and analysts are divided on whether the group will proceed, a Bloomberg survey showed last week.
On the one hand, going ahead with the supply revival would allow OPEC+ countries to reclaim sales volumes they’ve ceded during the cutbacks. It may also be welcomed by members including the UAE, which has been eager to utilize its investments in new production capacity.
And it could offer relief for exporters such as Russia, Iraq and Kazakhstan, which have dragged their heels in delivering their share of the agreed production curbs.
The trio have pledged extra reductions to compensate for past cheating, but have a poor history of fulfilling such pledges. Moscow is pursuing revenues to fund President Vladimir Putin’s war against Ukraine. These compensation cuts were the main focus of the meeting on Thursday.
Still, Saudi Energy Minister Prince Abdulaziz bin Salman has emphasized the group can “pause or reverse” the output revival.
Data from the International Energy Agency in Paris suggest that, with China cooling and US output brimming, a new surplus could emerge if OPEC+ perseveres with the supply boost in the fourth quarter. Citigroup Inc. has predicted that the group won’t start to restore supplies until the middle of next year.
Some of the most troubling signs for the cartel have come from China, the engine of global oil demand growth. The country’s crude imports in the second half of 2024 are projected to be flat or marginally higher than a year earlier, according to a Bloomberg survey of four forecasters.
The “OPEC+ plan to start increasing production from the fourth quarter is very much dependent on how demand behaves during this summer,” said Jorge Leon, senior vice president at consultant Rystad Energy AS. “If demand growth disappoints and we don’t see the stockpile draws anticipated, OPEC+ will change course.”
--With assistance from Nayla Razzouk.
(Updates with Algerian statement in 10th paragraph.)
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