Seven major oil-exporting countries agreed on 4 October to keep production steady in November, and they will meet again on 1 November to review conditions in the oil market, the Associated Press reported. The group, a subset of the wider OPEC+ alliance, is made up of Saudi Arabia, Russia, Iraq, Kuwait, Kazakhstan, Algeria and Oman. Brent crude was already above $100 a barrel because of the war with Iran, and it settled at $116.72 on Friday, up 3.1% and its highest since June 2022, according to AP’s market report on Monday. The question is whether holding output steady is the right response to the surge in prices.
The case for holding output steady begins with what OPEC+ can and cannot control. The price rise comes from the war that began with US and Israeli attacks on Iran on 28 February, which has disrupted global oil supplies, and the Strait of Hormuz remains contested, so extra barrels from producers inside the Gulf may not be able to reach buyers. Saudi Aramco chief Amin Nasser has said the East-West pipeline’s capacity rose from 2 million to 7 million barrels a day, bypassing the strait, which suggests that routes, as much as production, are the constraint. The Group of Seven has also planned to release 100 million barrels of oil and fuel products, with a “frontloaded substantial release” of diesel within 20 days and the rest over four months, which adds supply without any change in OPEC+ quotas. The US reinstated its naval blockade of Iranian ports on 14 July, and CENTCOM said on 22 October that it had blocked $25 billion in Iranian crude exports and, as of 17 October, redirected 138 ships, which also shapes how much oil reaches the market.
The case for raising output begins with prices and consumers. Brent was about $70 a barrel in February and settled at $116.72 on Friday, about two-thirds higher, and on Monday it was down 1.7% at $109.86 while US crude was down 2.1% at $101.08. Diesel prices recently hit record highs in the United States, and the International Monetary Fund warned this month that high energy prices pose significant risks, particularly for low-income and energy-importing economies. Japan’s trade deficit grew as oil imports soared, and in a Washington Post/ABC/Ipsos poll seven in 10 Americans said gasoline is becoming unaffordable. A decision to hold output flat leaves the market to rely on stock releases and diplomacy. CBS reported Brent at $112.27 on 22 October, and Al Jazeera reported it passing $114.20 on Friday morning, so prices rose across Thursday and Friday.
The decision matters because the global economy has little room for a further oil shock. The IMF projects global growth of 3.1% this year, and the Federal Reserve raised interest rates in September, saying that inflation “remains elevated.” The group’s meeting on 1 November comes two days before the US midterm elections, in which fuel prices are a leading issue.
OPEC+ chose stability over additional supply in November. Whether that holds will depend on the strait, the talks and a meeting a week away.
