The OPEC+ group will decide this weekend on production levels for December, in the first meeting since the United States slapped sanctions on the two biggest oil firms in Russia, a key member of the OPEC+ alliance and its second-largest producer after Saudi Arabia.
The producer group led by the Kingdom and Russia has been managing supply to the market for nearly a decade, mostly by restricting oil output to ensure “market stability” in OPEC+ lingo; in other words, to support oil prices or at least put a floor under them.
Market Share Lost
Since the pandemic price bust and the supply cuts that followed a brief price war, OPEC+ has withheld production at various times at various levels. Not all producers were on board that every member should cut production and take a revenue and market share hit.
So two years ago, a group of eight OPEC+ producers, including the biggest OPEC producers in the Gulf—Saudi Arabia, Iraq, the UAE, and Kuwait, plus Algeria—and the non-OPEC members of the OPEC+ alliance, Russia, Kazakhstan, and Oman, formed a coalition within the coalition to implement “voluntary” production adjustments.
But over the last two years, oil prices were high enough to incentivize U.S. shale growth, which chipped away at the OPEC+ global market share.
This spring, Saudi Arabia apparently decided it has had enough of reduced oil income and market share due to the large part of the OPEC+ production cuts it is shouldering.
So OPEC+ began to unwind its output cuts in April. So far in 2025, the group has announced – month by month – the reversal of a total of 2.7 million barrels per day (bpd). That’s the nominal increase in production quotas. The group has actually returned fewer barrels on the market as some producers aren’t hiking output to compensate for previous overproduction while others simply lack the capacity to boost production.
Early this month, OPEC+ proceeded with its cautious strategy of returning modest volumes of supply, a move cemented by the decision on October 5 to implement another 137,000 bpd production hike for November. This measured approach appears to be aimed at avoiding sinking oil prices, as post-summer demand weakens and forecasts warn of an impending glut.
Motivating the decision for a modest output boost despite the expected overhang, OPEC+ said it continues to unwind cuts “In view of a steady global economic outlook and current healthy market fundamentals, as reflected in the low oil inventories.”
The group has been saying this each month since April, in every press release announcing monthly production hikes.
But in view of the many geopolitical upheavals and uncertain economic impact of U.S. trade policies this year, OPEC+ also always warns that it has adopted “a cautious approach and retaining full flexibility to pause or reverse the additional voluntary production adjustments.”
The group meets on November 2 to decide December production levels. Indications are that the OPEC+ producers are leaning toward another slight increase in total quota, probably by another 137,000 bpd, sources with knowledge of the talks within the alliance told Reuters on Monday.
Market Share Regained?
It is unlikely that Saudi Arabia, as the OPEC+ leader, would begin pushing for a reversal of the recent production hikes unless Brent Crude prices drop to the low $50s per barrel for a sustained period of time, Bloomberg Opinion columnist Javier Blas argues.
If Brent slipped to the low $50s, the U.S. benchmark crude price, WTI, would be below $50 per barrel, effectively triggering a decline in U.S. shale production. In fact, industry executives say that even $60 per barrel WTI is too low for continued growth.
Following weeks into the high $50s, WTI only jumped above $60 at the end of last week after the U.S. sanctioned Russia’s top two producers, Rosneft and Lukoil, “as a result of Russia’s lack of serious commitment to a peace process to end the war in Ukraine.”
The sanctions, slated to take effect on November 21, roiled the market – again – and the supply chain and procurement of Russia’s key buyers, India and China. The uncertainty and unpredictability of the U.S. sanctions against Russia, with the market still uncertain if the sanctions would stick or how much they would disrupt supply out of Russia, introduced a new geopolitical risk in oil prices.
The move higher in oil just days ahead of the meeting to decide on December output levels gives OPEC+ ammunition to continue with the reversal of the cuts, even if with a token amount that would benefit mostly Saudi Arabia, which can boost production.
Until the Russian sanction situation becomes clearer, OPEC+ is likely to keep adding small volumes to monthly production, at least until the feared glut manifests itself at the key pricing hubs and begins dragging prices lower.
There will be a glut, analysts, forecasters, and investment banks concur. But the size of the overhang could become even more difficult to predict and observe if the U.S. sanctions incentivize another major wave of Russian oil moving into the shadow trade.
By Tsvetana Paraskova for Oilprice.com
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