Oil prices plunged 2% on Wednesday after reports claimed that OPEC+ may consider further oil output hikes in the coming months.
The Organization of the Petroleum Exporting Countries and allies will consider further raising oil production at a meeting on Sunday, according to a Reuters report.
Should there be an additional increase, OPEC+, responsible for approximately half of the global oil supply, would initiate the reversal of a second phase of output reductions, totaling around 1.65 million barrels per day (equivalent to 1.6% of global demand), more than a year ahead of schedule.
An online meeting of eight OPEC+ countries is scheduled for Sunday to determine October’s output.
According to the reports, there’s a possibility that OPEC+ might choose to halt output increases for October.
At the time of writing, the price of West Texas Intermediate crude oil was down 2% at $64.21 per barrel.
Brent crude oil on the Intercontinental Exchange was also 2% lower at $67.81 a barrel.
OPEC+ output cuts
The eight members of the OPEC+ alliance, including kingpin Saudi Arabia and ally Russia, have been raising production of oil since April this year.
The plan was to reverse the voluntary production cuts of 2.2 million barrels per day from April to September 2026.
However, the group has been raising output by 411,000 barrels per day every month since May.
Additionally, the group agreed to raise output further by 548,000 barrels a day for each of August and September.
A prevailing decision stipulates that the remaining restrictions of 3.66 million barrels per day, which include 1.66 million barrels per day on a voluntary basis, are set to continue until the close of 2026.
“We consider it unlikely that this will be changed outside of a regular OPEC+ meeting, especially since there is a risk of a considerable oversupply on the oil market from autumn onwards,” Carsten Fritsch, commodity analyst at Commerzbank AG, said.
Fears of supply disruptions
Oil prices have climbed sharply over the last few sessions.
Brent and WTI crude benchmarks both hit a near one-month high on Tuesday due to new US sanctions on several tankers and vessels associated with carrying Iranian oil.
Fritsch added:
Due to Labor Day, US markets were closed on Monday, which reduces the significance of yesterday’s price movements.
The market remained on notice as the threat of supply disruptions loomed large with both Russia and Ukraine targeting each other’s energy infrastructures.
Bloomberg is set to release data today on Russia’s seaborne oil exports. This release is anticipated to shed light on the impact, if any, of last week’s events.
Last week, overall shipments hit a four-week low, with those to India reaching their lowest point in nearly three years.
“It is quite possible that there will be a counter-movement,” Fritsch said.
India ignores US pressure
India’s government is unwilling to stop purchases of Russian oil despite increasing pressure from Washington.
India’s energy minister publicly defended the country’s oil purchases, asserting in an Indian daily newspaper that these actions had successfully stabilised the market and averted a potential price surge to $200.
There is still a financial incentive for Indian refineries to buy Russian Urals oil.
“According to informed sources, this oil is being offered at a discount of USD 3-4 per barrel compared to Brent for cargoes loaded at the end of September and in October,” Fritsch said.
By comparison, Indian refineries recently had to pay a premium of USD 3 over Brent for US oil.
Nayara Energy’s refinery, majority-owned by Russian entities, was added to the EU sanctions list in July.
Consequently, both Saudi Arabia and Iraq have ceased their oil supply to this Indian refinery, according to Commerzbank.
The refinery in question, which processes 400,000 barrels of crude oil daily, represents almost 8% of India’s total processing capacity.
Consequently, it is now anticipated to rely entirely on Russian oil imports.
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