S&P Global expects OPEC+ to increase oil production next year

The Organization of the Petroleum Exporting Countries (OPEC) and its allies, the group known as OPEC+, are expected to increase production next year for the first time since 2022, according to S&P. Jim Burkhard, vice president of research at S&P Global Commodity Insights, said this today at the Asia Pacific Petroleum Conference (APPEC).

Last week, OPEC+ agreed to postpone its planned increase in oil production until October and November. Oil prices have fallen sharply in recent weeks, reaching their lowest level in nine months. The group added that it could suspend or cancel its plans to increase production if necessary. Burkhard said there was significant pressure in some member countries to raise production, and that some were already producing more.

Oil prices were up about one dollar per barrel this morning, largely due to the threat of a hurricane in the Gulf of Mexico. Markets thus recovered from a sell-off following Friday’s weaker-than-expected US employment data. Overall, however, oil prices remain under pressure amid concerns about weakening demand in major economies, especially China and the United States.

Ben Luckock, Trafigura’s head of oil production, said weak demand in China was worrying markets. Some market participants believe Beijing may have additional economic stimulus measures in reserve, which will depend on the outcome of the US presidential election in November, he said. China is the world’s second-largest economy.

Gunvor co-founder Torbjörn Törnqvist added that the world is currently producing more oil than it consumes. He said this imbalance would worsen in the coming years. The problem is not OPEC, which he said had done a great job of managing the situation. The problem lies with countries outside OPEC.

The International Energy Agency (IEA) expects oil supply to increase by 770,000 barrels per day this year, to a record 103 million barrels per day. Supply growth is expected to more than double next year, reaching 1.8 million barrels per day. The United States, Canada, Guyana and Brazil will drive the increase in production.

Luckock believes oil prices could fall to 60 dollars per barrel relatively soon. Törnqvist, however, said oil’s fair value was around 70 USD per barrel. Brent crude was trading below 72 dollars per barrel this morning, compared with more than 90 dollars per barrel in April.

Burkhard said there was currently a great deal of spare production capacity around the world. The Middle East alone has capacity to produce more than five million barrels per day.