OPEC+ will likely begin unwinding its production cuts in October, six OPEC+ sources told Reuters on Friday.
If OPEC+ does decide to start the process of ramping up production in October, it will be largely offset by OPEC member Libya’s significant oil production losses that began this week.
Brent crude reacted violently to the anonymous insider news, falling more than 1.5% in mid-day trading, although original losses were already starting to ease at the time of writing.
So far, Libya’s production has seen a 700,000 bpd decline as a result of Libya’s eastern government shutting down oilfields as political infighting between two Libyan groups jockeying for power escalates. The significant production decline in Libya gives OPEC+ some room for other members to begin the slow process of ramping up crude oil production without altering the overall number of barrels entering the market.
Eight OPEC+ members are set to increase crude oil production by 180,000 bpd in October as part of the group’s existing plan to unwind the 2.2 million bpd of voluntary cuts. OPEC+ has, however, said that its plan to unwind the cuts was dependent on the balance in the oil markets.
The anonymous sources also told Reuters that the group hopes that the U.S. Federal Reserve would cut interest rates in mid-September.
Both WTI and Brent were trading down on the day, with WTI trading at $73.92, down $1.99 (-2.62%) per barrel. Brent crude was trading at $78.81, a $1.13 (-1.41%) per barrel loss.
Prior to the situation in Libya devolving that saw hundreds of thousands of barrels of crude daily taken out of the market, it was a widely acceptable stance that OPEC+ would be unable to back out of its millions of barrels of production cuts, with countries outside the group like the United States and Brazil continuing to increase production.
By Julianne Geiger for Oilprice.com
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