One clear indication of this is the reduction of Libyan oil supply by more than 800,000 barrels per day, which has not caused any notable reaction in the markets. Brent crude prices have dropped further, seemingly unaffected by the recent reductions in production. Unlike previous years, when such reductions typically drove prices higher, oil is currently trading below $75 per barrel.

Meanwhile, concerns continue to be raised about China's economy. The ongoing stagnation is continuing with no clear signs of improvement. This raises questions about when this economic giant will return to driving global demand. China’s demand is important for growth and oil market progression. It affects the ability of oil producers to utilize or activate their idle spare capacity of six million barrels.

This excess capacity remains in storage, yielding no return on investment, and risks being labeled as a bad investment. Here comes the role of OPEC+ to observe and decide if the time is right to delay the planned production increase of 80,000 barrels per day from next month, and gradually to 500,000 barrels per day by year-end. Currently, the situation is not looking good and does not favor an increase in production. Brent crude is trading near $73 per barrel, a level not seen in a long time. Market forces are not yet prepared for additional crude entering the market.

Unless there is a significant surge in demand, the outlook remains uncertain. Given these conditions, OPEC+ might need to consider further production cuts in December, though such a move could have potentially severe consequences. How and why did oil prices lose their momentum and drop into the low $70s within a short period without prior warning? This decline has even shocked OPEC+, with Brent crude trading below $70 per barrel.

The next question is - What would happen if oil prices fall further to around $70? How would they recover? How long will it take? OPEC+ is scheduled to meet in December and is unlikely to convene earlier unless faced with urgent decisions. For now, the organization must wait. Meanwhile, oil producers are seeing daily revenue losses of more than $10 per barrel, while independent producers continue to benefit from their daily income.

By Kamel Al-Harami
Independent Oil Analyst 
Email: [email protected]