Global oil markets are facing renewed turbulence as OPEC and its allies abruptly halt planned production increases, sending crude prices climbing to fresh multi-week highs. The surprise decision comes amid ongoing volatility in energy markets and mounting pressure on the UK's manufacturing sector.
Oil Prices Rally as OPEC+ Changes Course
Brent crude, the international benchmark, surged past $84 a barrel following the announcement that OPEC+ would pause scheduled output hikes. This represents a significant reversal from previous plans to gradually increase supply through early 2026.
The decision reflects growing concerns within the cartel about market stability and follows recent price declines that had wiped out most of 2024's gains. Analysts suggest the move indicates OPEC+'s determination to maintain price support despite geopolitical pressures and fluctuating demand forecasts.
UK Manufacturing Struggles Continue
Meanwhile, Britain's manufacturing sector remains mired in a prolonged downturn, with the latest S&P Global/CIPS UK manufacturing purchasing managers' index (PMI) showing contraction for the 29th consecutive month. The October reading of 47.2, while slightly improved from September's 46.5, remains firmly below the 50-point threshold that separates growth from contraction.
The sector continues to grapple with multiple challenges including:
- Weak domestic and international demand
- Ongoing supply chain disruptions
- Rising input costs, particularly energy
- Persistent inflationary pressures
Financial Markets React
The FTSE 100 opened cautiously as investors weighed the implications of rising energy costs against broader economic concerns. Oil and gas companies saw early gains, while manufacturing-exposed stocks faced pressure.
Rob Dobson, director at S&P Global Market Intelligence, noted: "The manufacturing sector remains a weak spot in the UK economy. While there are tentative signs of the downturn bottoming out, the combination of high energy prices and sluggish demand continues to constrain any meaningful recovery."
What's Next for Energy Markets?
Market attention now turns to how sustained higher oil prices might influence inflation trajectories and central bank policies. With winter approaching and geopolitical tensions simmering, energy costs are likely to remain a key driver of economic sentiment in the coming months.
The OPEC+ decision underscores the delicate balancing act facing policymakers as they attempt to support economic growth while managing inflationary pressures exacerbated by rising energy costs.
