Sharp decline in oil prices exceeds 2% ahead of crucial OPEC+ meeting
Oil prices experienced a sharp decline on Wednesday, September 3, as they fell by more than 2% at settlement, influenced by expectations that the "OPEC+" alliance would discuss a new increase in production during its scheduled meeting next week, in addition to disappointing U.S. economic data.
In today's trading, Brent crude futures recorded a decrease of $1.54, or 2.23%, to settle at $67.60 per barrel. Meanwhile, U.S. crude futures (WTI) fell by $1.62, or 2.47%, to settle at $63.97 per barrel.
This decline follows market speculation regarding the "OPEC+" alliance's plans to increase production. Two informed sources told Reuters that eight member countries of the group will discuss a new increase in oil production during a meeting scheduled for next Sunday, as part of the alliance's efforts to regain its market share.
These expectations were reinforced by expert analysis, as Phil Flynn, an analyst at Price Futures Group, stated: "The chances of the OPEC+ group raising oil production have increased ahead of the meeting. Investors expect the group to continue this approach."
If this increase is announced, it would mean that the alliance, which produces about half of the world's oil supplies, may begin to end the second tranche of production cuts of around 1.65 million barrels per day (or about 1.6% of global demand) more than a year ahead of schedule.
It is noteworthy that the group had previously agreed to gradually increase targeted production levels by about 2.2 million barrels per day during the period from April to September, along with raising the UAE's production share by about 300,000 barrels per day. However, the "actual increases in the alliance's production have not reached the level of commitments announced in the agreement, as some members reduced production to compensate for previous oversupply, while other producers faced obstacles in increasing production due to capacity constraints."
Additionally, weak economic data from the United States contributed to the pressure on prices, as such data negatively reflects on oil demand expectations. Data from the U.S. Department of Labor on Wednesday revealed a decline in job openings (which is considered a measure of demand in the labor market) to 7.181 million jobs in July, compared to economists' expectations in a Reuters survey of 7.378 million jobs.
Furthermore, data released earlier this week showed that the manufacturing sector in the United States contracted for the sixth consecutive month, raising concerns about slowing growth and declining energy demand.
