The OPEC+ alliance's crude oil production rose strongly last September, driven by increased Saudi production, despite the continued disruptions witnessed by oil shipments through the Strait of Hormuz due to the Iran war, according to the monthly report of the Organization of the Petroleum Exporting Countries (OPEC) issued on Tuesday.
In parallel, the organization raised its expectations for the growth of global oil demand in 2027 to 2.55 million barrels per day, compared to 2.36 million barrels per day in its previous estimates, indicating the need to rebuild stocks that were depleted as a result of supply disruptions resulting from the war. On the other hand, it reduced its expectations for demand growth during the current year for the sixth month in a row, to 180,000 barrels per day, from about 380,000 barrels per day in August estimates.
The report data showed that the average production of the OPEC Plus alliance, which includes OPEC countries and allies from outside it, including Russia, rose in September by about 903 thousand barrels per day, reaching 39.068 million barrels per day, compared to 38.165 million barrels per day in August. Thus, production has increased by about 1.36 million barrels per day since July, when it reached 37.710 million barrels per day, according to the secondary sources that OPEC relies on to monitor production.
The increase was mainly driven by OPEC countries, whose production rose by about 920 thousand barrels per day, to 25.097 million barrels per day, compared to 24.177 million barrels per day in the previous month, while the production of participating countries outside the organization declined by about 180 thousand barrels per day.
Saudi Arabia is leading the increase
Saudi Arabia recorded the largest increase in production among the coalition countries, as its production rose in September to 8.372 million barrels per day, according to figures reported by the Kingdom to OPEC, an increase of more than two million barrels per day compared to August, according to the report. The data showed that production recorded in August amounted to 6.238 million barrels per day, according to the numbers provided by Saudi Arabia to the organization.
The increase in production comes at a time when the Kingdom seeks to restore oil flows and enhance the flexibility of its exports in the face of turmoil resulting from the war. Aramco increased oil loading operations from export terminals in the Gulf during September, after an attack on the East-West pipeline disrupted shipments through the Red Sea.
Global demand and inventories
OPEC expected that global demand for oil in 2027 would rise by 2.55 million barrels per day, reaching an average of 108.3 million barrels per day, compared to 108.19 million barrels per day in last month’s estimates. The organization said that these expectations assume a decline in demand growth in 2026, as currently expected, with the need to refill spent stocks supporting demand growth next year.
In 2026, the organization expects global demand to grow by only 180,000 barrels per day. It also reduced its estimate of global demand during the last quarter of this year to 107.73 million barrels per day, from 107.85 million barrels per day in last month’s report.
The organization expected a contraction in demand in OECD countries by about 210,000 barrels per day during the current year, compared to a growth of 390,000 barrels per day in non-member economies.
Regarding supply from outside the OPEC Plus alliance, the organization expected supplies to grow by 640,000 barrels per day in 2026, and 620,000 barrels per day in 2027.
Russian production declines
On the other hand, Russia’s oil production decreased in September by 38 thousand barrels per day, to 8.643 million barrels per day, according to the report’s data. The decline comes amid continuing Ukrainian strikes targeting Russian energy infrastructure, including oil refineries.
Russian Deputy Prime Minister Alexander Novak said that his country will reduce its oil production slightly during the current year, while the Russian Ministry of Economy reduced its production expectations in 2026 to the lowest level in 17 years, in light of the war with Ukraine.
In Kazakhstan, oil production increased in September by 22 thousand barrels per day compared to August, reaching 1.851 million barrels per day, according to the OPEC report.
Wholesale prices in Japan continued to rise during September, driven by a weak yen and higher costs of energy and raw materials, which kept expectations of raising interest rates intact, despite the slowdown in the pace of inflation compared to the previous month.
Bank of Japan data showed, on Tuesday, that the price index for goods and services traded between companies rose by 6.8 percent on an annual basis, compared to an increase of 7.6 percent in August, and the reading came below market expectations of 7.6 percent. But import prices denominated in yen jumped by 24.5 percent during September, reflecting the continued impact of the weakness of the Japanese currency and rising raw material prices on companies' costs.
The data is of particular importance before the Bank of Japan's meeting on October 29 and 30, during which it will issue its new quarterly forecasts for growth and inflation, with investors awaiting signals about the date of the next increase in interest rates.
Masato Koike, chief economist at Sompo Institute Plus, said that wholesale price inflation may accelerate again as a result of continued uncertainty related to the conflict in the Middle East, which is keeping oil prices high. But he pointed out that there are no indications of a sharp acceleration in inflationary pressures currently, which enhances the possibility of stabilizing interest rates in October, and waiting for December to take a new step.
In statements before Parliament on Tuesday, Bank of Japan Governor Kazuo Ueda said that core inflation has become very close to the 2 percent level. He explained that the economy has moved to a different stage; After the goal of monetary policy was to raise inflation towards the target level, the priority now is to maintain its stability around that level.
A separate Central Bank survey showed an increase in the percentage of households that expect prices to increase over the next five years to 86.5 percent, compared to about 86.1 percent in June. However, the expected pace of inflation has declined; Households estimated that prices would rise over the next year by an average of 11.8 percent, compared to 13.1 percent previously, while the average expected annual increase over the next five years decreased to 10.1 percent from 10.8 percent.
At the sector level, prices of agricultural products fell by 13.3 percent, driven mainly by a decline in rice prices, while prices of a wide range of industrial goods rose.
The prices of chemical products increased by 13.3 percent, plastic products by 12.8 percent, while the prices of non-ferrous metal products jumped by 40.2 percent. These increases reflect the impact of the weak yen and the Iran-related conflict, along with strong demand for products used in artificial intelligence applications. The Bank of Japan is focusing on the extent to which higher corporate costs are transmitted to consumer prices, and the impact on household spending, as two critical factors in determining the pace of monetary tightening.
The bank raised interest rates in June and September, reaching the highest level in 31 years, as its attention shifted towards preventing core inflation from exceeding its 2 percent target.
The recent consumer inflation data in Tokyo, which recorded the fastest pace of increase in 10 months, reinforces the importance of next October’s meeting. Although the markets do not rule out temporarily stabilizing interest rates, many analysts expect an additional increase before the end of the year, if price pressures continue and are transmitted more broadly to consumers.
