OPEC Plus to Boost Output
Modestly, Then Pause in Fear of Oil Oversupply in 2026
Eight members of the oil cartel agreed on
Sunday (02.11.2025) to a small increase but said they would now pause in adding
more oil, reflecting market concerns about an oversupply.
The
OPEC Plus alliance, led by Saudi Arabia, announced on November 2, 2025, that it would raise oil production by
137,000 barrels per day in December, but then pause further increases
for the first quarter of 2026 amid growing concerns of a potential global oil glut.
The
group cited seasonal demand declines—as refineries reduce operations early in
the year—as a key reason for the pause. Analysts, however, view the move as a
sign that OPEC Plus sees early signs of oversupply, with internal
projections already showing inventory builds in early 2026.
The
decision comes as the oil market faces complex geopolitical and economic
pressures:
·
U.S. sanctions on two Russian oil companies have created
uncertainty over Russian exports to reduced supply and raise prices on demand
from oil monopolies led by Saudia plus US Oil.
·
Rising tensions between Washington and Venezuela threaten further
disruptions.
·
Meanwhile, surging production from the United States,
Canada, and Guyana is set to push global supply 4 million barrels per
day above demand next year, according to the International Energy
Agency.
Analysts,
including Shell CEO Wael Sawan, warned of a “highly credible
scenario of oversupply in 2026.” Yet market indicators such as Brent crude’s
backwardation—with near-term prices higher than future ones—suggest that
demand remains relatively firm for now.
Saudi
Arabia’s strategy appears aimed at balancing political and market pressures: maintaining goodwill
with President Trump’s administration while keeping OPEC Plus unity intact. The eight
participating countries—Saudi Arabia, Iraq, the UAE, Kuwait, Kazakhstan, Algeria, Oman,
and Russia—plan to reassess output in early 2026 depending on market
conditions.
A
group of eight countries belonging to the oil cartel known as OPEC Plus said on
Sunday (02.11.2025) that it would increase oil production by 137,000 barrels a day
beginning in December, but signaled caution about its
next steps in the face of concerns about oversupply.
The
group, in a surprise, said that it would “pause” adding oil for the first three
months of next year and that it would closely monitor market conditions and maintain
“full flexibility” in deciding whether to continue pausing production increases
or even resume cuts.
In
a news release, the group attributed the temporary halt to “seasonality.” Indeed,
demand for crude oil tends to drop in the first quarter as refineries reduce runs.
“They don’t want to add barrels in a seasonally weak market,” said Amrita Sen, the
director of market intelligence at Energy Aspects, a research firm.
But
perhaps more significant, the announcement seems to indicate that the group, which
sells enormous volumes of oil to major importing countries like China and India,
is picking up signs that there are risks of an oversupply next year.
“They do their own balances, and their balances
are also showing builds” in the first quarter, Ms. Sen said.
Bachar
El-Halabi, a senior energy markets analyst for Argus Media, a research firm, said
that staying put “will definitely give them better visibility over market fundamentals.”
OPEC
Plus is maneuvering against a complex backdrop. There
are now questions about future exports from Russia, a key supplier, after Washington
recently sanctioned two Russian oil companies. Tension is also building between
the Trump administration and Venezuela, a substantial oil producer.
On
the other hand, concerns have emerged that oil supplies are growing much faster
than demand, potentially leading to a surplus that would be difficult to manage.
“The
global oil market may be at a tipping point as signs of a significant supply glut
emerge,” Toril Bosoni, the head of the oil industry and markets division at the
International Energy Agency in Paris, wrote in an analysis this month.
Ms.
Bosoni said that the unwinding of production cuts by OPEC
Plus along with continued increases by countries outside the group, including the
United States, Canada and Guyana, would lead to supply outstripping demand by nearly
4 million barrels a day, or more than 4 percent in 2026.
She
said in an email that the large difference between output and consumption was “untenable,”
suggesting that some sort of course correction was likely to occur.
OPEC
Plus might cut back, for instance, or lower prices might lead the United States
and other producers to reduce production, or sanctions on Russia, Iran or Venezuela
might cut into supplies.
Some
industry leaders echo these concerns. On Thursday, Wael Sawan, the chief executive
of Shell, told analysts that there was “a highly credible scenario” of “an oversupply
in 2026.”
Until
recently, Saudi Arabia, which leads the group, seemed to shrug off such worries.
The
Saudis, who are largely in control of these decisions, are trying to achieve a delicate
balance between continuing to unwind the layers of production cuts the group previously
agreed on while not spooking the market.
By
increasing output modestly, the Saudis also appear to be splitting the difference
between keeping in the good graces of President Trump, who has forged a close relationship
with Riyadh, while keeping their partners in OPEC Plus on board.
The
other members of the group of eight include Iraq, the United Arab Emirates, Kuwait,
Kazakhstan, Algeria and Oman.
So
far, the markets are not behaving as though there is a glut. For instance, Brent
crude is trading somewhat higher for December than later dates. This pattern, known
as backwardation, suggests that there is substantial demand for crude and that “global
oil markets may be tighter than they appear,” analysts at J.P. Morgan wrote in a
research note on Thursday.