As anticipation grows for major oil-producing countries to increase oil supplies starting from October, oil prices have plummeted. The shrinking expectation that the Federal Reserve will not implement a "big cut" (a 50bp reduction) in September has also had an impact.

On the 30th (local time), at the New York Mercantile Exchange, the near-month contract for West Texas Intermediate (WTI) crude oil for delivery in October fell by $2.36 (3.11%) from the previous trading day, closing at $73.55 per barrel. The October delivery price for Brent crude oil, which serves as a global benchmark, fell by $1.14 (1.43%) from the previous trading day, closing at $78.80 per barrel.

Reuters reported on the same day, citing multiple sources, that OPEC+, composed of oil-producing countries from the Organization of the Petroleum Exporting Countries (OPEC) and non-OPEC countries such as Russia, has decided to phase out the voluntary production cuts that began in April, as initially planned, starting from October. Last November, eight major oil-producing countries including Saudi Arabia, Russia, and Iraq had voluntarily cut production by 2.2 million barrels per day. The decision not to extend the voluntary production cut deadline, which ends in September this year, means that these eight countries will phase in an increase in oil production over the next year, from October to September next year.

Advertisement

The announcement to stop cutting production offset news that internal conflicts have hindered Libya's crude oil production. According to consulting firm Rapidan Energy Group, the closure of oil fields in the eastern part of Libya has resulted in a daily production reduction of 900,000 to 1 million barrels.

Iraq's supply is also decreasing as its production exceeds its OPEC+ quota. CNBC reported that Iraq will reduce its daily oil production to 3.85 million to 3.9 million barrels next month.

The U.S. Personal Consumption Expenditures (PCE) Price Index released on the same day exerted both upward and downward pressures. The PCE price increase in July was 0.2% month-on-month, continuing to be slow. Therefore, it will be difficult for the Federal Reserve (Fed) to make a "bold" move in monetary policy next month. The dollar appreciated, and oil prices fell, while the July personal consumption expenditure (nominal) increased strongly by 0.5% month-on-month, reflecting robust demand.

Baker Hughes reported that the number of oil drilling rigs operating in the United States this week remained unchanged at 483, but overall in August, there was an increase of one rig.