Oil Prices Plunge as OPEC+ Meeting Delay Amplifies Discord
Oil prices slumped further on Thursday following the unexpected decision by OPEC+ to postpone a critical policy meeting. The delay has heightened concerns about disagreement within the alliance and its ability to effectively manage global oil production. Both major crude contracts suffered losses after news broke that the highly-anticipated gathering of OPEC+ – led by Saudi Arabia and Russia – would be rescheduled for November 30, four days later than planned. Prices experienced a one percent decline on Thursday, adding to the nearly five percent drop witnessed the day before.
The decision to postpone the meeting reportedly came as Angola and Nigeria resisted calls for lower targets, opposed by other member countries. Additionally, there were indications that Saudi Arabia was considering extending its existing one-million-barrel-a-day output cut into the new year. This move reflects the ongoing challenges faced by major oil producers in their efforts to prop up prices amidst sluggish economies in the United States, Europe, and particularly China.
Commenting on the situation, Stephen Innes, an analyst at SPI Asset Management, pointed out, Oil prices fell after OPEC reported a delay in the weekend meeting, which hints at a growing rift among OPEC+ producers. With US and non-OPEC production on the rise, it should be no surprise that producers want to pump more oil, not trim production, for fear of losing even a tiny sliver of the market share. And the ceasefire in the Israel-Hamas war gives hope for some stability in the region.
While global stock markets reacted variably to these developments, the effects of two recent US reports provided mixed trading sentiments. Investors were less euphoric about future interest rates following the release of these reports. In Asia and Europe, equity markets experienced fluctuations, with Hong Kong rebounding from early losses to finish higher in the afternoon session. Shanghai, Seoul, Wellington, Mumbai, and Jakarta also witnessed gains, while Sydney, Singapore, Taipei, Manila, and Bangkok faced declines. Similarly, Paris and Frankfurt stocks rose, but London saw modest losses during midday trading.
The tepid market performance follows the release of data indicating an increase in inflation expectations among US consumers, who now project it to be at 4.5 percent over the next year. This figure exceeds the previous estimate of 4.4 percent, according to the University of Michigan. Additionally, US jobless claims proved to be significantly lower than anticipated, indicating a resilient labor market. The Federal Reserve, which considers inflation and employment data for interest rate decisions, has consistently emphasized its data-driven approach.
As the oil and financial markets grapple with these developments, it remains to be seen how OPEC+ will tackle the challenges ahead and whether member countries can overcome their differences to sustain stability and growth.
