Explainer: How Reluctant OPEC+, Demand Concerns weigh on Oil Market

The main cause of the current pessimistic assessment is growing demand fears following disappointing economic statistics from the three major oil demand regions: the US, China, and Europe. This has resulted in a rise in risk aversion.

It appears that there has been an overstatement of the price reduction. Consequently, pressure was applied to the stock markets as well as other cyclical commodities like base metals. There is a growing amount of uncertainty as to whether the previously anticipated noticeable increase in oil demand in the second half of the year will occur. However, there were obstacles on the supply side as well. Only because of the intense pressure from declining oil prices did OPEC+ decide to defer the production increases scheduled for October by two months.

The hesitant position of OPEC+ suggests that the cartel members still wish to raise production. Another factor driving the declining will to keep the present production reductions is the ongoing overproduction of certain members, like Kazakhstan and Iraq. Thus, given the implicit market balances for 2025, there is no longer any room for an increase in production, but there is a chance of a repeat in two months at the latest.

Analysts still believe the extent of the price decline is overstated, but the prospect of an oversupply caused by OPEC+ in the coming year should prevent a significant price recovery.