Oil prices have dropped as indications emerge that OPEC+ will proceed with plans to increase output starting in October, coupled with growing economic concerns in China.
Brent crude for November delivery fell towards $76 per barrel after a decline of over 2% on Friday. West Texas Intermediate (WTI) also traded near $73 per barrel. According to delegates, OPEC+ is set to add 180,000 barrels per day to the market, gradually restoring production that has been paused since 2022.
Recent Chinese economic data has raised concerns about demand, showing a continued contraction in factory activity for August and a deepening slump in the residential sector. These indicators suggest that China, the world’s largest crude importer, may struggle to meet its economic growth targets for the year. Additionally, diesel sales in India have also seen a significant drop.
The oil market has experienced substantial volatility recently, with crude futures facing some of their largest intraday swings in August. This volatility reflects mounting expectations of ample supply and economic headwinds, including those in the US.
OPEC+ has indicated that it may “pause or reverse” its planned output increases if necessary. However, the current political crisis in Libya, which has halved the country’s oil production, might provide the alliance with additional leeway to increase supply.
“There are still concerns over whether the market needs this additional supply,” noted Warren Patterson, head of commodities strategy at ING Groep NV in Singapore. “Worries about Chinese demand are unlikely to disappear in the near term.”
