Skip to content Skip to Search
Skip navigation

Opec+ delay to output rise fails to rejuvenate oil price

By Eva Levesque
Opec secretary general Haitham Al Ghais. Analysts say the body is running out of options to stabilise oil prices Reuters/Henry Romero
Opec secretary general Haitham Al Ghais. Analysts say the body is running out of options to stabilise oil prices
  • Attempt to stabilise prices falls flat
  • Aramco share price drops further
  • Oil market is ‘broken’ says analyst

The decision by Opec+ on Thursday to postpone its oil output hike until December has failed to pump up the markets, where the sentiment remains bearish. 

While Opec+ still holds sway over global balances, it is running out of options to stabilise prices, analysts said, as the share price of Aramco, the world’s biggest producer, continues to tumble.

The oil bloc – which is made up of the Organisation of the Petroleum Exporting Countries and allies led by Russia – is “almost like a sailor desperately trying to plug the holes in a ship to save it from sinking further”, said Onyx Insight, a UK-based analytics company. “They must be running out of plugs by now.”

Text, Number, Symbol

You might also like:
Economic indicators from every GCC country

Neil Atkinson, a Paris-based independent energy analyst, said “the market has moved against” the oil producing group and it must “accept that oil prices cannot reach their desired levels soon”.

Brent plummeted quickly after a short rise, trading at $73.03 a barrel at 11:58 GST Friday morning, only 0.47 percent up, while WTI was still under $70 a barrel.

“Opec+ can influence supply, but not demand, and weak demand is currently the main driver of the weakness,” Ole Hansen, head of commodity strategy at Saxo Bank, told AGBI.

“Until that situation stabilises, Opec will not be able to increase production, probably not until sometime next year.” 

Opec+ is holding back 5.86 million barrels per day of output. The organisation was planning to return 180,000 bpd to the market.

Reduced volumes and weaker prices are a nightmare combination for Opec+, but plugging the falling oil price had destructive effects on the group’s market share of global production, which went down from 35 percent last year to 32 percent in July, according to the International Energy Agency’s July report.

Meanwhile, non-Opec countries, mainly the US, Brazil and Guyana, increased their output while global oil demand peaked.

Additionally, some Opec members, such as Iran, Kazakhstan and Russia, do not play the game. Non-compliance to Opec+ cuts and overproduction “is a growing problem”, said Robin Mills, CEO of Qamar Energy and an AGBI columnist. “I don't expect Iraq et al to seriously compensate.”

Matt Stanley, Dubai-based head of market engagement at data provider Kpler, said that with weak demand data coming out of China, the world’s biggest oil importer, oil prices are naturally taking a hit.

“If Opec+ were to deepen the cuts, it would likely spark a more dramatic response in prices,” said Stanley. However, getting everyone to agree on this is a stretch, “especially with some members pushing to raise output”.

“Opec+ can still play the stabiliser, but it’s tricky given the external pressures and internal struggles,” Stanley said.

“Cuts have hit the producing countries severely and Opec producers don’t want to lose more market share,” noted Ali Al Riyami, consultant and former director general of marketing at Oman’s Ministry of Energy and Minerals.

Even news of Libya’s oil blockade did not trigger a big pricing reaction. 

“The Libya situation could have given them a window, but they have chosen to err on the side of assuming it's quickly resolved,” said Mills.

Thursday’s Opec+ announcement did not bring any good news for Aramco shareholders. The Saudi oil giant’s share price is down over 1 percent since Monday and nearly 20 percent since a year ago.

“Something is broken with the oil markets,” said Viktor Katona, lead crude analyst at Kpler.

There is a big interest in keeping oil prices low two months before the US elections, and there are fears that the US economy will go into recession too, said Hassan Hafidh, independent energy consultant and former Opec executive.

“The data coming out of the US is divergent, with many sectors and indicators painting different pictures. But vulnerabilities persist, especially in key labour market segments,” Onyx said.

Atkinson concluded that “if the demand outlook weakens further” then Opec+ might have to make more production cuts.

Latest articles

Gulf airlines, Gulf airlines conflict, Gulf conflict risk, Gulf flights cancelled rerouted

Conflict risk leads Gulf airlines to cancel regional routes

Gulf airlines are among airlines that have cancelled and rerouted flights across the Middle East as the conflict between Iran and Israel escalates. They are avoiding Iranian airspace and many have cancelled routes entirely following a major missile attack by Iran against Israel on Tuesday. Immediately after the attacks about 80 flights operated by carriers […]

Taaleem's schools offer 'exclusive educational experiences' including access to high-tech equipment profits

Dubai school operator Taaleem increases profit by 55%

Dubai school operator Taaleem has reported revenue of AED945.2 million ($257.3 million) for its 2023-24 financial year – a 15.5 percent year-on-year increase. More student enrolments and the opening of new schools helped Taaleem to increase net profit before tax by 55 percent, to AED182 million, in the financial year ending August. Taaleem’s shares were […]

Shein IPO

Mubadala-backed Shein courts investors before London IPO

Chinese fashion retailer Shein, which is backed by the Abu Dhabi sovereign wealth fund Mubadala, is courting European investors before an initial public offering on the London Stock Exchange. Shein is due to hold informal meetings to answer questions and test the investment appetite of major investors in the coming weeks, before its planned IPO […]

Workers stand on a scaffold in Dubai. Building a high rise in the UAE can be as much as two thirds cheaper than in other major cities

Apartments in UAE among cheapest to build in the world

Building a standard residential high-rise in Dubai or Abu Dhabi is up to two-thirds cheaper than in other major global cities, thanks to land, labour and raw materials all costing much less. Land is up to three times cheaper in the UAE compared with the prices paid in New York, London, Hong Kong and Singapore […]