The Organization of the Petroleum Exporting Countries (OPEC) and its allies have postponed their meeting to discuss oil production policy, causing oil prices to plunge by 4%. The meeting was originally scheduled for November 26 but has been delayed until November 30.
The U.S. benchmark, WTI Crude, crumbled by 4.37% to below $75 a barrel, to $74.55, while Brent Crude, the international benchmark, dived below the $80 a barrel threshold, at $79.12 down by 4.26% on the day.
The reason for the postponement is unclear, but it is likely due to a number of factors, including the ongoing uncertainty in the global economy, the potential for a recession, and the recent decline in oil prices.
The postponement of the meeting is a sign that OPEC+ is divided on how to respond to the current market conditions. Some members are in favor of cutting production in order to prop up prices, while others are against this, arguing that it would be harmful to the global economy.
The November 26 meeting of the ministers of the OPEC+ alliance could be postponed due to Saudi Arabia expressing dissatisfaction over the production levels of the other members, delegates have told Bloomberg. The delay in the meeting is also likely to lead to further uncertainty in the oil market, which could cause prices to continue to fall.
It is likely that Saudi Arabia will extend its oil production cut in 2024. The country has already extended its voluntary cut of 1 million barrels per day (bpd) through December 2023, and there is speculation that it could extend this cut further into 2024. If the speculations are to be true, then oil prices are supposed to increase again. This is because a reduction in supply will make oil more scarce, which will drive up demand and prices.
In addition to the direct impact on oil prices, an extended oil production cut can also have a number of indirect effects on the economy. For example, higher oil prices can lead to potentially lead to higher inflation, which can erode consumer purchasing power and slow economic growth. Additionally, oil-producing countries may benefit from increased oil revenues, while oil-importing countries may experience economic hardship.
It remains to be seen what OPEC+ will decide when they eventually meet, but the postponement of the meeting is a significant development that is likely to have a major impact on the oil market in the short term.