FRANKFURT, Germany (AP) — The OPEC+ alliance of oil exporting countries is set to make a crucial decision on Thursday regarding potential delays in increasing crude oil production. This decision comes in light of sluggish demand and heightened competition from non-allied countries, factors that could potentially keep oil prices stagnant well into the next year.
The OPEC+ alliance, which includes Saudi Arabia as the dominant member of the OPEC producers' cartel and Russia as the leading non-OPEC member, is convening an online meeting to discuss the possibility of postponing production increases scheduled to take effect on January 1.
Originally, eight OPEC+ members planned to gradually restore 2.2 million barrels per day in previous production cuts starting from January 1. However, analysts are now suggesting that the group might opt to delay these production increases for an additional three months as they closely monitor demand.
Oil prices have been under pressure due to weaker-than-expected demand from China and increased production from countries like Brazil and Argentina, which are not part of the OPEC+ alliance. Consequently, oil analysts have been revising down their demand estimates for the upcoming year, potentially prolonging the challenges faced by OPEC+ well into 2025.
Despite the need for oil revenue to support ambitious economic diversification plans in Saudi Arabia and to fund the war against Ukraine in Russia, the decision to hold back production could risk losing market share. On the other hand, increasing production and sales could lead to lower prices in a global economy that is already well supplied with oil.
Current U.S. oil prices are hovering around $70 per barrel, down from $80 in August, while international benchmark Brent crude is trading at $72.66 per barrel, a decrease from around $80 in July.
One positive outcome of the lower oil prices is the significant drop in U.S. average pump prices for gasoline, which have fallen to $3.03 a gallon this week, the lowest since May 2021. This decline is a welcome relief for U.S. motorists, with thirty-one states now enjoying average gas prices below $3 a gallon.
Analysts at Commerzbank are forecasting that Brent prices will average $75 per barrel in the first quarter of next year and $80 for the remaining three quarters.
In the United States, the potential return of Donald Trump to the White House could lead to increased fossil fuel production, as the President-elect has campaigned on expanding drilling activities. His Treasury secretary nominee has proposed an economic plan aimed at boosting domestic oil production by 3 million barrels a day, with the goal of alleviating inflationary pressures for U.S. consumers.
Established in 1960, OPEC is an intergovernmental organization that has since expanded to include 12 member countries. In response to falling oil prices due to U.S. shale oil output, OPEC formed the OPEC+ agreement in 2016 with 10 other oil-producing nations.
