As the Middle East conflict continues to expand, OPEC+ temporarily gave oil market bulls a boost on Thursday: OPEC+ will maintain its current supply in the third quarter unchanged, but may move forward with canceling some production cuts from October.

OPEC+ will maintain its production unchanged.

On Thursday, several ministers of OPEC+ held an online ministerial joint monitoring committee meeting (JMMC) and announced that the current oil supply scale will remain unchanged. However, the production recovery policy previously agreed upon will continue, and some production cuts will be canceled from October.

OPEC+ also reiterated that if necessary, it may suspend production cuts or switch to increasing production.

Since 2022, OPEC+ member countries have implemented a series of production cuts in order to boost the market in the context of uncertain global demand and increasing supply outside of OPEC.

OPEC+ currently cuts production by 5.86 million barrels per day, accounting for about 5.7% of global demand, including a reduction target of 3.66 million barrels per day for OPEC+ member countries and 2.2 million barrels per day of voluntary production cuts by a number of countries.

In a post-meeting statement, OPEC+ said that member countries will continue to voluntarily reduce production by 2.2 million barrels per day until September, and reiterated that depending on the market situation, it may suspend or reverse the gradual production cuts plan.

Due to concerns about strong oil demand, international oil prices have fallen from above $92 per barrel in April 2021 to below $81 per barrel. However, this week's increased tension in the Middle East has provided support for oil prices.

The current oil price level is suitable.

Russian Deputy Prime Minister Novak (Alexander Novak) said on Thursday that the current oil price level is appropriate for Russia and other market participants. He added that there is still a balance between oil supply and demand in the market.

"From the fourth quarter, if the supply and demand balance is positive, it is possible to increase production in part." Novak said.

Algerian Energy Minister Mohamed Arkab said that as long as the market is sufficiently supplied, the uncertainty that affects the oil market is unlikely to last too long. He added that oil demand is expected to continue to rise in the next few weeks.

According to a source close to the organization, OPEC+ has a few weeks to consider before deciding whether to increase production from October.

JMMC is composed of oil ministers from Saudi Arabia, Russia, and other major oil-producing countries, and usually holds meetings every two months, and can make recommendations to the wider OPEC+ group. The next JMMC meeting will be held on October 2.

Over the next year, production cuts will be gradually canceled.

At the June meeting, OPEC+ agreed to gradually cancel 2.2 million barrels per day of production cuts from October 2024 to September 2025. At that time, OPEC+ also agreed to extend the previous production cut of 3.66 million barrels per day until the end of 2025.

Shortly thereafter, Saudi Arabia's Energy Minister Prince Abdulaziz bin Salman said that if OPEC+ believes that the market is not strong enough, it may suspend or expand production cuts.

The above statement by OPEC+ caused oil prices to fall in June, and OPEC+'s announcement to maintain production cuts this time has slightly eased market nervousness.

In the statement on Thursday, OPEC+ also noted the assurances made by Iraq, Kazakhstan, and Russia to fully comply with production cuts during the meeting. These countries had previously submitted compensation plans for overproduction in the past.

The JMMC will hold its next meeting on October 2nd.

Editor/ping