Oil Prices Stabilize Amid OPEC+ Supply Delay Talks and Demand Concerns

Petroleum Price

• Oil was attempting to hold its ground in early trade on Thursday after an overnight sell-off, as players grappled with weak demand alongside a possible delay in the introduction of more supply next month.
• Brent crude futures rose by 9 cents, or 0.12%, to $72.79 at 0002 GMT, after dropping 1.42% in the previous session. U.S. West Texas Intermediate crude futures for October were up 12 cents, or 0.17%, to $69.32, after dropping 1.62% on Wednesday. MCX crude oil prices opened at 5857 with a gain of 0.10%.

Petroleum Demand and Supply

• OPEC+ is discussing the possibility of delaying its planned oil output increase, which is scheduled to start in October, after oil prices fell to a nine-month low on Sept. 3, according to four sources from the producer group who spoke to Reuters on Wednesday.
• Last week, the Organization of the Petroleum Exporting Countries and its allies, led by Russia, were set to proceed with a 180,000 barrels-per-day output hike in October, as part of a plan to gradually unwind the most recent cuts of 2.2 million bpd.
• However, the resolution of a dispute that had halted Libyan exports, combined with soft Chinese demand that drove oil prices to multi-month lows, has led the group to reconsider.
• “The (OPEC+) report brought some relief to markets in early trading,” ANZ analysts said in a note.
• However, demand concerns following news that China’s factory activity contracted for the fourth straight month in August added pressure, ANZ added.
• Data published over the weekend by the Chinese government revealed that the country’s manufacturing activity fell to a six-month low last month, as factory gate prices tumbled and owners struggled for orders.

Petroleum News

• China is the world’s largest crude importer. Meanwhile, U.S. crude oil and fuel inventories fell last week, according to market sources citing American Petroleum Institute figures on Wednesday.
• The API figures showed that crude stocks fell by 7.431 million barrels in the week ended Aug. 30, according to the sources, compared with analysts’ expectations in a Reuters poll of a one-million-barrel draw.
• The market is awaiting the weekly U.S. oil stocks data from the Energy Information Administration, due to be released on Thursday at 11:00 a.m. EDT (1430 GMT).
• According to the American Petroleum Institute (API), crude oil inventories declined by 7.4 million barrels for the week ending August 30. This figure was much higher than the market expectation of a decline of 0.90 million barrels.
• In their Commodities Feed, ING Think’s Warren Patterson, Head of Commodities Strategy, and Ewa Manthey, Commodities Strategist, said the API numbers released overnight were constructive. U.S. crude oil inventories are estimated to have fallen by 7.4 million barrels over the past week, while refined products also saw small stock declines. Gasoline and distillate inventories fell by 300,000 barrels and 400,000 barrels, respectively. EIA weekly data will be released later on Thursday, and a similar crude oil number would represent the largest weekly decline since late June, they said.
• Stating that crude oil prices continued to move lower on Wednesday, they said while ICE Brent settled a little more than 1.4 percent lower on the day, NYMEX WTI settled below $70 a barrel for the first time since December.

Expert Opinion

• The continued weakness comes despite reports that OPEC+ is considering delaying its supply increase scheduled for October. Clearly, lingering demand concerns outweigh any potential delay in this supply increase.
• If these reports turn out to be accurate, the next key question will be how long the group will delay the supply increases. The oil balance is projected to be in surplus through 2025 (assuming OPEC+ increases supply), so continuing cuts into 2025 may make sense.