Oil Prices Decline as Supply Increases in Global Market

Oil prices experienced a decline of over 1% on Monday, driven by expectations of increased global supply. Plans by the Organization of the Petroleum Exporting Countries and its allies, collectively known as OPEC+, to boost oil output in November, along with the resumption of oil exports from Iraq’s Kurdistan region via Turkey, contributed to a more optimistic supply outlook.

Brent crude futures fell by $1.01, or 1.4%, settling at $69.12 a barrel by 10:19 GMT. Meanwhile, U.S. West Texas Intermediate crude dropped $1.11, or 1.7%, to $64.61. This decrease follows a week of gains, with both benchmarks rising by more than 4% in the previous week.

OPEC+ Plans Increase in Production

OPEC+ is expected to approve another increase in crude oil production during its upcoming meeting on October 1, 2023. Sources indicate that the group is likely to confirm an increase of at least 137,000 barrels per day for November, responding to rising oil prices that have prompted efforts to regain market share. Despite these plans, OPEC+ has been producing nearly 500,000 barrels per day less than its targets, which contradicts market expectations of a supply surplus.

On Saturday, oil exports from the semi-autonomous Kurdistan region of northern Iraq resumed for the first time in two and a half years. The Iraqi oil ministry announced that a new interim agreement between Iraq’s federal government, the Kurdistan Regional Government (KRG), and foreign oil producers will allow between 180,000 and 190,000 barrels per day to flow to Turkey’s Ceyhan port. This resumption could eventually bring up to 230,000 barrels per day back to international markets.

Geopolitical Context Influencing Prices

The recent drop in oil prices follows significant developments in global energy dynamics. Ukrainian drone attacks targeting Russian energy infrastructure last week impacted fuel exports from Russia, leading to increased volatility in oil markets. Analysts from SEB noted, “Ukraine naturally smells blood here… If anything, Ukraine will likely double up on its strategic attacks on Russian refineries.”

In a related geopolitical context, Russia launched a series of airstrikes against Kyiv and other Ukrainian cities early on Sunday, marking one of the most sustained assaults on the capital since the beginning of the conflict in 2022. Additionally, the United Nations has reinstated an arms embargo and imposed further sanctions on Iran concerning its nuclear program, with Tehran warning of severe repercussions.

The interplay of increased supply and geopolitical tensions continues to shape the landscape of global oil prices, making future movements in the market highly anticipated by analysts and stakeholders alike.