Oil prices were lower on Tuesday as investors braced for a supply surplus due to potential plans by the Organisation of the Petroleum Exporting Countries and allies (OPEC+) for a larger output hike next month and the resumption of oil exports from Iraq’s Kurdistan region via Turkey.
Brent crude futures lost 95 cents or 1.4 per cent to trade at $67.02 a barrel and the US West Texas Intermediate (WTI) crude futures declined by $1.08 or 1.7 per cent to sell for $62.37 a barrel.
At its meeting next Sunday, OPEC+, which pumps about half of the world’s oil, may speed up production increases in November from the 137,000 barrels per day hike it made for October, as its leader, Saudi Arabia, pushes to regain market share.
Eight members of OPEC+ could agree to raise production in November by 274,000-411,000 barrels per day , or two or three times higher than the October increase.
According to some sources, the increase could be as big as 500,000 barrels per day. Earlier on Tuesday, Bloomberg News reported that OPEC+ was considering accelerating its increases by 500,000 barrels per day. However, OPEC in a post on X said it rejected media reports for plans to raise output by 500,000 barrels per day, calling them inaccurate and misleading.
Market analysts noted that such a strategy could significantly squeeze margins for high-cost US shale producers, potentially forcing them to scale back the record-level output they’ve maintained.
Meanwhile, crude oil have started flowing through a pipeline from the semi-autonomous Kurdistan region in northern Iraq to Turkey for the first time in two-and-a-half years, after an interim deal broke a deadlock. As a result, additional supplies are weighing on market prices.
The market has remained cautious in recent weeks, balancing supply risks, which mainly arise from Ukraine’s drone attacks on Russian refineries, with expectations of oversupply and weak demand.
Also, President Donald Trump won Israeli Prime Minister Netanyahu’s support for a US-backed Gaza peace proposal, but the stance of Hamas was uncertain.
This could possibly see shipping traffic through the Suez Canal return to normal following a Gaza peace deal, which would remove a significant portion of the geopolitical risk premium.
The market is also watching a potential risk of a US government shutdown has raised demand concerns
The American Petroleum Institute (API) estimated that crude oil inventories in the US fell by another 3.674 million barrels in the week ending September 30. This is on top of last week’s 3.821 million barrel draw. So far this year, net crude oil inventories are have swung to a loss this week of 2.22 million barrels.
Official data from the US Energy Administration (EIA) will be due later on Wednesday.