Crude Prices Dip 2% as OPEC+ Eyes More Output Increase

By Adedapo Adesanya

Crude oil prices declined by more than 2 per cent on Wednesday as producers under the Organisation of the Petroleum Exporting Countries and allies (OPEC+) are expected to consider another increase in production targets in October.

Brent crude was down by $1.6 or 2.31 per cent to $67.54 a barrel, while the US West Texas Intermediate (WTI) crude fell by $1.68 or 2.56 per cent to $63.91 a barrel.

Eight members that make up a sub-group of OPEC+ will consider further raising oil production at a meeting on Sunday, as the 22-nation group seeks to regain market share.

OPEC+ has reversed its strategy of output cuts from April and has already raised quotas by about 2.5 million barrels per day, about 2.4 per cent of world demand, to boost market share and under pressure from US President Donald Trump to lower oil prices.

Another boost would mean OPEC+, which pumps about half of the world’s oil, would be starting to unwind a second layer of output cuts of about 1.65 million barrels per day, or 1.6 per cent of world demand, more than a year ahead of schedule.

The group had already agreed to raise output targets by about 2.2 million barrels per day from April to September, in addition to a 300,000 barrels per day quota increase for the United Arab Emirates (UAE).

This constitutes of a 547,000 barrels per day increase for September, completing the total increase in output for the year of 2.5 million barrels per day.

The next output cut layer of 1.65 million barrels per day is in place until the end of 2026, as is another 2 million barrels per day of cuts by the whole group.

It was also reported that there is a minimal chance that OPEC+ could pause the increases for October.

Delayed data from the American Petroleum Institute (API) estimated that crude oil inventories in the US rose by 622,000 barrels in the week ending August 22. So far this year, crude oil inventories are up 7.4 million barrels.

Official data from the US Energy Information Administration (EIA) will be released later on Thursday, since there was a public holiday on Monday in the US.

Pressure also came as US Labor Department data showed on Wednesday that job openings, a measure of labor market demand, fell more than expected to 7.181 million in July. This shows soft economic data which tends to weigh on the demand outlook for oil.