Brent gains as OPEC+ delays production hike

The front-month ICE Brent contract gained $0.18/bbl on the day from Friday, to trade at $74.84/bbl at 09.00 GMT.

PHOTO: Oil barrels with stacks of dollar bills. Getty Images

Upward pressure:

Brent’s price moved higher after key OPEC+ members agreed to extend the group's ongoing 2.2 million b/d output cut until the end of this year. Eight members of the Saudi Arabia-led coalition were due to unwind output cuts from December. However, on Sunday, they decided to delay the supply increase amid recent weakness in prices.

“OPEC+ just threw oil analysts another curveball, delaying its much-anticipated December production boost by a month,” SPI Asset Management’s managing partner Stephen Innes remarked.

The members have agreed to restore this output from 1 January 2025. This announcement marks the second delay to OPEC’s supply agreement. “A second deferral that speaks volumes about the group’s delicate dance with volatile demand and fragile economic outlooks,” Innes added.

Besides, geopolitical tension remains elevated in the Middle East, with over 100 projectiles launched by Iran-aligned Hezbollah militants over the weekend, the Israel Defense Forces (IDF) said. Iran could hit Israel in retaliation for striking its military bases last week, according to a report from Axios. This could stoke renewed supply fears in the global oil market.

“Iranian supreme leader Ayatollah Khamenei on Saturday threatened a 'crushing response' to Israel’s October 26 air strikes on the Islamic Republic’s military targets,” VANDA Insights’ founder and analyst Vandana Hari said.

Downward pressure:

Surplus oil supply in the market has capped some of Brent’s price gains.

Oil production in the US, the world’s largest oil consumer, hit a record high of 13.4 million b/d in August, surpassing the previous record high of 13.3 million b/d, the US Energy Information Administration (IEA) said in its latest monthly oil and natural gas production report.

Israel’s targeted attack on military bases in Iran last week raised hopes about de-escalation of the Middle Eastern conflict, as it eased supply concerns from the region. This news has also added some downward pressure on Brent’s price, according to market analysts.

“The limited strike on Iran by Israel saw the market pare back its expectations around disruptions to supply,” ANZ Bank’s senior commodity strategist Daniel Hynes said.

By Aparupa Mazumder

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