Is OPEC+ likely to postpone output hike in Q1’25?

OPEC Plus is contemplating delaying its oil output hike scheduled to begin in January for the first quarter of next year as it prepares for further discussions on this matter and other alternatives before its adjourned policy meeting on Thursday. Chinnan Dikwal, Vice Chair at the African Energy Council, shed light on OPEC Plus' recent signals and the near-term price outlook in an interview with CNBC Africa. The decision to move the meeting from December 1 to December 5 was officially attributed to a clash with a meeting in Kuwait by the Gulf Arab states. However, industry analysts speculate on the implications of this shift, particularly in light of recent developments. One significant factor under scrutiny is a study on China's manufacturing sector that has raised questions about the market's reaction and the subsequent impact on demand, particularly from China. Postponing the meeting gives OPEC Plus time to assess these evolving market dynamics and incorporate them into their discussions. Additionally, uncertainties such as the weakening demand, potential market implications of the incoming US administration's policies concerning oil markets, and prior commitments to the UAE add layers of complexity to the decision-making process. The postponed meeting on the 5th of December provides a platform for OPEC Plus to deliberate on these critical issues and plot a course forward. Despite the ongoing output cuts, oil has maintained a trading range between the 70s and upper 80s throughout the year. This stability has persisted despite efforts to prop up prices through production cuts, with OPEC reducing output by over 2 million barrels and OPEC Plus collectively contributing to about 5.5 million barrels off the market. The objective of these cuts was to boost oil prices, but the market has predominantly hovered between $70 and $80 per barrel. This has posed challenges for oil-dependent countries like Nigeria, whose budget projections were based on higher oil prices. The uncertainties surrounding global demand projections from various entities only add to the complexity of the situation. While conflicts in the Middle East have somewhat supported oil prices, factors such as weakening demand in China, necessitating liquidity injections, have dampened price increases. However, recent signs of improvement in Chinese demand have led to a slight uptick in Brent and WTI prices. Looking ahead to 2025, OPEC anticipates an average oil price of around $74 per barrel, indicating a relatively stable outlook compared to 2024. Structural shifts in the market, including the electrification of transportation and increasing demand destruction, suggest a changing landscape that OPEC will need to navigate. The discrepancies between OPEC's demand growth forecasts and those of organizations like the IEA highlight the evolving nature of the oil market dynamics and the need for agility in response to these shifts.