One month later, OPEC+will announce its decision on whether to gradually ease the ongoing oil production cuts starting from October as planned, amid speculation in the market about the organization's production policies.

OPEC+sources have recently hinted that easing production cuts will begin as planned, causing oil prices to further fall below $80 per barrel last week. At a time when demand seemed unstable, the market responded to the possibility of increased supply.

As of 13:50 on Wednesday, the price of Brent crude oil was $73.45 per barrel. For most OPEC+oil producing countries, oil prices seem very low, and they need at least $80 or even $90 in oil prices to balance their budgets.

Even OPEC acknowledged in its August monthly report that demand was weaker than expected and oil prices were below $80 per barrel, which typically means the OPEC+alliance may delay starting to ease production cuts.

But OPEC+and one of its key officials, Saudi Energy Minister Abdulaziz bin Salman, are known for their unexpected production policies, either "burning the bears" and making traders "sigh", or showing the market who is responsible for supply and who is actively "stabilizing" the market.

OPEC+may begin to relax production cuts

Until a few days ago, most analysts believed that OPEC+would delay the start of easing production cuts as the organization faced slowing demand and market pessimism amid concerns about an economic slowdown.

But recent reports and market speculation suggest that OPEC+'s production plan announced in June will remain unchanged: increasing production by 180000 barrels per day starting in October.

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Analyst Clyde Russell stated in his column that in the current situation of weak demand, OPEC and its allies led by Russia may also choose to increase supply in order to boost medium-term demand in the face of falling oil prices.

The key question is whether OPEC+oil producing countries are willing to "reduce production at the cost" in the short term to ensure an increase in demand for their products in the medium term.

Increasing supply and lowering prices may also disrupt the plans of American producers, which could slow down drilling activities if oil prices fall to near breakeven levels.

As the saying goes, the way to deal with low prices is to have low prices. Allowing commodity prices, which are crucial for global economic growth, to fall, OPEC+may hope for a rebound in demand, especially for major importing countries in Asia that often purchase and store more crude oil at lower prices.

Russell pointed out that low prices may also alleviate inflation, prompting more central banks to start cutting interest rates.

Weak demand, strong supply growth

At present, global oil demand seems to have not met OPEC's expectations, which is that consumption will increase by over 2 million barrels per day this year.

The weak demand from major Asian countries, coupled with concerns about US demand and the potential economic slowdown in the US and Europe, is dampening market sentiment.

Even OPEC acknowledges in its latest monthly report that demand from major Asian countries is lower than expected. The unsatisfactory data so far this year, coupled with expectations of slowing demand growth in the country, prompted OPEC to lower its oil demand growth forecast for the next two years last month. This is the first time the organization has lowered its initial forecast for 2024 since it was released a year ago.

OPEC stated that oil demand will increase by 2.11 million barrels per day in 2024, which is still a "healthy" growth rate, far higher than the historical average of 1.4 million barrels per day before the pandemic, but the latest demand growth forecast is 135000 barrels per day lower than the estimated 2.25 million barrels per day in July. OPEC stated in its monthly Oil Market Report (MOMR) that this downward adjustment reflects actual consumption data for the first and second quarters of this year, as well as a weakened expectation for China's oil demand growth in 2024.

Although OPEC has lowered its forecast for oil demand growth in 2024 for the first time, the gap between OPEC's growth assessment and that of the International Energy Agency (IEA) remains 1 million barrels per day, and OPEC's view is more optimistic.

Most investment banks and analysts expect oil demand growth of around 1.2 million barrels per day to 1.5 million barrels per day this year, lower than OPEC's optimistic outlook but higher than IEA's forecast of demand growth of around 1 million barrels per day in 2024.

Due to slowing demand and increased supply from non OPEC+countries, analysts have recently lowered their oil price forecasts.

Morgan Stanley recently lowered its oil price forecast, reflecting the expected increase in supply from OPEC and non OPEC oil producing countries amid signs of weak global demand. The bank currently expects that although the crude oil market will remain tight in the third quarter, it will begin to stabilize in the fourth quarter and may turn into surplus by 2025.

Goldman Sachs lowered its forecast range for Brent crude oil prices by $5 last week, to $70 to $85 per barrel. This investment bank stated that the increase in US supply offset some seasonal demand. The increased efficiency of American producers has resulted in shale oil supply exceeding Goldman Sachs' expectations by 200000 barrels per day.

Goldman Sachs analysts wrote that OPEC+may decide to increase market supply, which could "strategically dispose of supply from non OPEC countries".

The analysts of the bank pointed out that "oil prices may be significantly lower than expected in the short term, especially if OPEC strategically blocks the growth of shale oil in the United States, or if an economic recession reduces oil demand

Continuous daily chart of Brent crude oil