On Sunday, OPEC+ agreed to raise oil output by 137,000 barrels per day (bpd) from November. The increase is equal to the one adopted in October, with markets seeing it as a cautious step amid persistent fears of an oversupplied market.
This relatively modest increase came after the group hit back at rumors of a potential 500,000 bpd increase. So far this year, the OPEC+ alliance has increased its output targets by more than 2.7 million bpd, representing approximately 2.5 % of global demand. The group clearly remains intent on reclaiming market share from non-OPEC producers while not pushing prices too low.
Leading up to the meeting, tensions between Russia and Saudi Arabia were widely reported. Russia reportedly favored sticking with a modest increase, citing sanctions-related constraints and a desire to avoid downward pressure on prices. Saudi Arabia, on the other hand, is said to have lobbied for a much more aggressive hike. In the end, the modest increase prevailed, reflecting a compromise aimed at stability.
OPEC itself justified the cautious posture by pointing to a “steady global economic outlook and current healthy market fundamentals,” notably citing relatively low oil inventories.
At the time of writing, Brent crude was trading at $65.45, up by nearly 1.5% on the day, while WTI had climbed to $61.78.
There is also a structural challenge underpinning these moves by OPEC+ as the group is eroding its spare capacity cushion with each increase. Over time, this thinning of slack capacity may reduce the cartel’s ability to respond flexibly to shocks.
The eight producers will reconvene on November 2 to reassess and potentially adjust further output plans. This meeting will be closely watched for signs of whether the group accelerates rollbacks or adjusts strategy in the face of evolving demand signals and inventory trends.
By Charles Kennedy for Oilprice.com
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