Oil Plummets As OPEC Gears Up For More Production Increases Next Month

However, some analysts question its capability to deliver:File Image/Pixabay

The Organization of the Petroleum Exporting Countries (OPEC) on Monday dashed cold water on last week’s bullish run of oil prices, with sources claiming it is gearing up for another output increase in November.

Brent settled down $2.16 at $67.97 per barrel, and West Texas Intermediate was down $2.27 at $63.45 per barrel.

Three sources told media that OPEC this coming Sunday during a meeting will likely agree to boost output by at least 137,000 barrels per day (bpd), in a bid to further regain market share; however, OPEC has been pumping far less than its targets, a shortfall on the order of 500,000 bpd.

RBC Capital Markets analysts wrote in a note, “Given that many producers, excluding Saudi Arabia, have essentially hit their production ceilings, future OPEC+ supply increases will be materially lower than the announced headline numbers,”

Also spooking traders was Iraq’s oil ministry reporting that crude was once again flowing for the first time in over two years through a pipeline from the Kurdistan region in northern Iraq to Turkey; about 180,000 to 190,000 bpd will flow to Turkey’s Ceyhan port.

Offsetting these bearish factors to a small degree was ever-increasing geopolitical tension over the weekend, with Russia launching more than 600 drones and dozens of missiles at Ukraine; it was one of the largest aerial attacks of the war between the two countries.

Of Monday’s trading, Bloomberg noted that in addition to OPEC’s influence, “Today’s slide also reflects a pullback from last week’s highs, when traders covered long positions ahead of the weekend to hedge against mounting threats to Russian energy infrastructure.”

As for what may lie ahead, Ole Hansen, head of commodities strategy at Saxo Bank, said, “The major forecasters are still looking for price weakness in the coming months and as long as the Russia focus does not turn into an actual disruption of supply, traders will at least in the short term struggle to build a bullish narrative, not least considering the risk of another OPEC+ production increase.”