Oil prices rise! OPEC+ takes the "first step to pause production increases": continues to expand production in December, suspends in the first quarter of next year.

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After OPEC+ decided to increase production by 137,000 barrels per day in December, it will suspend its production increase plan in the first quarter of next year, injecting a dose of stability into the turbulent oil market, prompting oil prices to rise.

On Sunday, after its online meeting, OPEC+ announced that eight member countries led by Saudi Arabia will raise output by 137,000 barrels per day in December, consistent with the increase in October and November. However, the organization also stated that, considering seasonal factors, it will suspend production increases from January to March next year.

This decision applies the brakes to OPEC+'s production increase plan. Over the past month, the crude oil market has experienced dramatic volatility; oil prices once fell to nearly five-year lows due to oversupply concerns, then sharply rebounded on new US sanctions against Russia. Following the announcement of the production suspension, oil prices rose. Brent crude briefly climbed above $65 per barrel, and WTI crude traded near $61 per barrel.

Analysts believe this move by OPEC+ is both a compromise to a weak market and a strategic wait given the uncertainty surrounding the impact of Russian sanctions. The International Energy Agency (IEA) predicts a global daily crude oil oversupply of 3.7 million barrels for the current quarter, while JPMorgan estimates 3.6 million barrels.

Seeking Balance Between Stability and Production Increase

This production increase decision is a continuation of OPEC+'s gradual removal of production restrictions. The organization is lifting the reduction quota of about 1.65 million barrels per day imposed in 2023, following an earlier round of 2.2 million barrels per day reduction that was completely canceled a year ahead of schedule.

Originally, the organization began reducing output from 2023 to stabilize oil prices, but recently changed strategy, attempting to regain market share from US shale producers, Brazil and Guyana, while restraining some member countries that frequently overproduce.

The eight member countries participating in this voluntary output cut include Saudi Arabia, Russia, Iraq, the UAE, Kuwait, Kazakhstan, Algeria, and Oman. These oil-producing nations will meet again on November 30. In Sunday’s statement, OPEC+ reiterated its assessment of a "stable global economic outlook and current healthy market fundamentals".

The Shadow of Oversupply Remains

Despite OPEC+ sending a signal of stability, the market still faces oversupply pressure. IEA’s October forecasts show a global average daily oversupply of 3.7 million barrels this quarter. JPMorgan analysts estimated 3.6 million barrels.

Jorge León, Head of Geopolitical Analysis at Rystad, said: "Yes, OPEC+ is making a concession—but it’s a calculated one. By suspending production increases, OPEC+ is protecting prices, showing unity, and buying time to see how sanctions affect Russian oil supplies."

ANZ Group analysts Brian Martin and Daniel Hynes noted in a report: "Representatives said the decision to suspend production increases from January reflects expectations of seasonal slowdown. We suspect they are also aware that the market may struggle to absorb any extra supply, especially if disruptions to Russian supplies ultimately turn out to be temporary."

In October, oil prices fell to their lowest in nearly five years due to oversupply concerns, then jumped $5 within two days on news of new US sanctions against Russia, but gave back gains as the market expected Russian crude exports would eventually find new channels.

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