Oil prices experienced a sharp decline following indications that OPEC+ may increase production again in November. This development has tempered the rally observed in the previous week. West Texas Intermediate (WTI) fell by 3.4 per cent to settle near $US63 a barrel, marking its most significant drop since June. Brent crude also closed below $US70 a barrel.
The OPEC+ alliance, led by Saudi Arabia, is reportedly considering raising output by at least the 137,000 barrel-a-day hike that is already scheduled for next month, according to sources familiar with the matter. While such an increase could add further supply to a market expected to already be in excess, it would also bring further scrutiny to which of the group’s members are hitting capacity limits.
Analysts at RBC Capital Markets, including Helima Croft, suggest that a repeat of the incremental 137,000-barrel-a-day addition for November is the most likely outcome, referring to the decision expected at the group’s October 5 meeting. This comes as many producers, excluding Saudi Arabia, have essentially hit their production ceilings.
The analysts further added that future OPEC+ supply increases will likely be materially lower than the announced headline numbers. The market will be closely watching the outcome of the upcoming meeting to assess the true impact on global oil supply.
