Oversupply pressures are mounting; this week, OPEC+ plans to hold steady and maintain its pause on production increase plans.

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In the face of global oil supply surpluses, OPEC+ is expected to maintain its established plan to pause production increases at its meeting this weekend.

According to Bloomberg on December 30, citing three representatives, the core OPEC+ member states led by Saudi Arabia and Russia will hold their monthly video conference on January 4. The meeting is expected to reaffirm its decision first made in November to pause further production increases until the first quarter of 2026. This move is an adjustment by the alliance in response to market changes, after it had partially restored output earlier this year.

OPEC+ already confirmed this policy at a meeting earlier this month. Informed representatives say that this meeting is expected to confirm it again, with relevant internal consultations ongoing.

Since the beginning of this year, WTI crude oil prices have fallen by 20% in total and are expected to post the biggest annual drop since 2020. Meanwhile, oil supplies from OPEC+ and its competitors have continued to rise, while global demand growth has slowed significantly. Several authoritative agencies, including the International Energy Agency, forecast a record oil supply surplus in the market next year. Even the usually relatively optimistic OPEC Secretariat has acknowledged in its latest report that there may be a small supply surplus next year.

Rising Geopolitical Risks

As this OPEC+ online meeting convenes, the global oil market is facing multiple overlapping geopolitical risks.

OPEC member state Venezuela has been forced to shut down oil wells due to US government sanctions, with US authorities detaining and tracking tankers carrying Venezuelan oil. Russian oil infrastructure and tankers have been attacked by Ukraine, and these attacks have also affected another alliance member, Kazakhstan.

In addition, during the war in Yemen, OPEC+ leader Saudi Arabia and neighboring United Arab Emirates experienced rare public tension in their relationship. On Tuesday, Saudi Arabia urged the UAE to stop supporting armed groups active in Yemen.

Twists and Turns in Production Increase Plans

Although there were already signs that global oil supply was quite sufficient at the time, Saudi Arabia and its allies decided this April to accelerate the restoration of output that had been suspended since 2023, a move that surprised market traders.

The alliance agreed to first quickly restore the initial 2.2 million barrels per day of production quotas, then gradually restore other quotas. However, as surplus pressures increased, the alliance decided last month to pause further production increases. At present, about 1.2 million barrels per day of capacity in these two quotas remains unrecovered, and some member states are facing difficulties achieving their promised production increase targets.

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