Opec+ Maintains Oil Output Policy for October Amid Ongoing Iran Conflict and Market Volatility

Opec+ has decided to keep its output policy unchanged for October following an online meeting of its seven core members, including Saudi Arabia and Russia. This decision comes as the producer group works to complete the unwinding of a layer of production cuts totalling 1.65 million barrels per day, which were originally announced in 2023.

Previously, the group—which includes Iraq, Kuwait, Kazakhstan, Algeria and Oman—agreed to increase output by 188,000 bpd for September, matching the level set for the previous three months. Before that adjustment, Opec+ had opted to raise production by 206,000 bpd each month for April and May, while pausing output increments for the first three months of the year due to seasonal demand patterns.

The seven Opec+ countries will continue to hold monthly meetings to review market conditions, with the next session scheduled for October 4, Opec announced on Sunday. The group also previously increased production by 137,000 bpd for October, November, and December from the 1.65 million adjustments implemented three years ago. Notably, the UAE left the group in May after nearly six decades of membership.

Oil markets continue to experience significant volatility due to the ongoing conflict between Iran, a key Opec member, and the US. The Strait of Hormuz, a vital waterway that previously transported about 20 per cent of the global supply of crude and liquefied natural gas before fighting started on February 28, remains effectively closed. Oil prices previously surged to an intraday high of $126 per barrel in late April following attacks by the US and Israel on Iran, and subsequent retaliation from Tehran targeting America's Gulf neighbours and Iraq. Although prices fell in subsequent months during peace talks between the US and Iran, oil trading resumed its upward trajectory this week amid renewed fighting, raising concerns about further disruptions in the Strait of Hormuz.

Consequently, Brent crude jumped 0.8 per cent to settle at $96.28 a barrel, while West Texas Intermediate added 0.2 per cent to close at $82.44 a barrel. The US and Iran recently traded strikes, with Washington hitting targets near the strait and Iran launching ballistic missiles towards US military positions in Jordan. Furthermore, Kuwait reported that its forces intercepted a new round of attacks on Thursday morning.

The conflict is expected to continue into next year, with the Pentagon planning to extend US military presence across the Middle East, according to The Wall Street Journal. Meanwhile, Iran continues to target ships in the Strait of Hormuz, disrupting the flow of oil to global markets. This violence recently resulted in the deaths of two Filipino crew members during an attack on a Saudi supertanker on Monday. As a result, shipping traffic across the strait has dropped significantly, with only a handful of vessels making the crossing daily compared to more than 100 before the conflict began.