OPEC+ is expected to face challenges in adjusting its oil production strategy during its upcoming meeting on December 1. With weak global oil demand persisting, sources and analysts indicate that increasing output could be risky, while deepening supply cuts may be difficult due to some member countries advocating for higher production.
The group, which includes the Organization of the Petroleum Exporting Countries and allies like Russia, has already postponed plans to gradually increase production several times this year. The latest delay occurred during a virtual meeting on November 3, where ministers decided to shelve an increase for at least another month.
One OPEC+ source commented, “I can’t say it’s popular in the group, but there would be no strong objection to a delay until the first quarter.” However, two other sources noted that it was premature to determine the group’s decision.
Originally, OPEC+ had intended to slowly roll back production cuts through modest increases over the next few years. However, a slowdown in demand from China and globally, coupled with rising output from outside the group, has dampened these plans. Currently, OPEC+ has cut output by 5.86 million barrels per day, representing about 5.7% of global demand, in a series of agreements initiated since 2022 to stabilize the market.
Despite these cuts, oil prices have largely remained within the $70-$80 per barrel range this year. Saudi Arabia is reportedly focused on addressing compliance issues among OPEC+ members before considering any output increases. While some countries, like Iraq, have reduced their output, improving overall compliance, the group still faces a delicate balancing act.
Increasing production in a market with stagnant demand could lead to falling prices, a scenario OPEC+ is keen to avoid, especially since many member states require prices above $70 to meet their budgetary needs.
Speculation exists that OPEC+ might eventually resort to a price war to regain market share, reminiscent of the strategy employed in 2014-2015 against U.S. shale producers. However, analysts note that the current landscape is different; U.S. producers have become more resilient and cost-efficient, complicating any potential price war.
With OPEC+’s output now accounting for 48% of global supply, its lowest share since its formation in 2016, the dynamics of the oil market are shifting. The U.S. has emerged as the largest oil producer, contributing over 20 million bpd to global production.
Analysts from Macquarie suggest that the likelihood of OPEC+ increasing output in early 2025 appears slim due to seasonal demand weaknesses. Additionally, deepening production cuts may face resistance from members like the United Arab Emirates and Iraq, who are advocating for increased quotas.