Oil Prices Decline Amid OPEC+ Output Boost and Sluggish Demand

Price

• Oil prices extended losses on Monday as investors weighed higher OPEC+ production starting in October against a sharp drop in output from Libya, amid sluggish demand in China and the U.S., the world’s two biggest oil consumers.
• Brent crude futures fell 57 cents, or 0.7%, to $76.36 a barrel by 0108 GMT, while U.S. West Texas Intermediate (WTI) crude slipped 50 cents, or 0.7%, to $73.05 a barrel. MCX Crude oil prices opened at 6142 with a fall of 0.98%. These losses followed a 0.3% decline for Brent last week and a 1.7% drop for WTI.

Demand and Supply

• The Organization of the Petroleum Exporting Countries and their allies, a group known as OPEC+, is set to proceed with a planned oil output hike from October, according to six sources from the producer group who spoke to Reuters.
• Eight OPEC+ members are scheduled to boost output by 180,000 barrels per day in October as part of a plan to begin unwinding their most recent layer of output cuts of 2.2 million bpd, while keeping other cuts in place until the end of 2025.
• “There are concerns that OPEC will go ahead and increase output from October,” said IG market analyst Tony Sycamore. “However, I think that outcome is price-dependent, and it happens if the WTI price is closer to $80 than $70.”
• In Libya, the Arabian Gulf Oil Company has resumed output of up to 120,000 bpd to meet domestic needs, while exports are still halted, engineers said on Sunday, following a standoff between factions that shut down most of the country’s oilfields.
• Both Brent and WTI have posted losses for two consecutive months as economic concerns in China and the U.S. outweighed the disruption in Libyan supply and rising geopolitical tensions in the Middle East.

News

• China’s manufacturing activity sank to a six-month low in August as factory gate prices tumbled and owners struggled for orders, an official survey showed on Saturday, pressuring policymakers to continue with plans to direct more stimulus to households.
• “The softer-than-expected China PMI released over the weekend heightens concerns that the Chinese economy will miss growth targets,” Sycamore said.
• In the U.S., oil consumption slowed in June to the lowest seasonal levels since the coronavirus pandemic of 2020, data from the U.S. Energy Information Administration showed on Friday.
• “We see downside in growth in 2025, driven by economic headwinds in China and the U.S.,” ANZ analysts said in a note. “We believe OPEC will have no choice but to delay the phase-out of voluntary production cuts if it wants higher prices.”
• The number of operating U.S. oil rigs remained unchanged at 483 last week, according to Baker Hughes in its weekly report.

Expert Opinion

• It is expected that the initial bullish reaction to the OPEC+ announcement will be short-lived, as crude prices, including global benchmark Brent futures, have shown a downward trend. After rising from a six-month low of $76.76 a barrel on June 4 to $87.85 on July 5, Brent has since slid to $78.80 a barrel by August 30. The weakness persisted into the first trading day of September, with prices dropping as low as $76.23 during Asian trading. The anticipated continuation of this trend is driven by a lack of acceleration in import demand from China and Asia, coupled with growing concerns about slowing economies across Europe and North America.