OPEC+ has approved a limited production increase of 137,000 barrels per day starting in October, a rise that fell short of expectations and is significantly lower than the previous increases of 555,000 barrels in August and September. This move highlights a clear shift toward caution in supply management, especially amid evident volatility in global demand and declining consumption appetite in major economies.
Despite this caution, OPEC+ is still moving along an upward production path through 2025, driven by its desire to regain market share and offset falling prices by increasing export volumes a delicate balance between stabilizing the market and maintaining revenues.
Estimates from research institutions, notably Haitong Securities, indicate that the market may face a supply surplus in the fourth quarter of the year, especially given weaker actual demand compared to previous forecasts. This structural divergence between supply and demand forms the core of price balance in the coming phase and raises questions about the feasibility of continued production increases in an environment characterized by economic slowdown. At the same time, the risk remains of rising supplies from outside the alliance particularly from the United States reviving fears of a market glut and renewed price pressures.
Political tensions have escalated following the largest Russian airstrike on Ukraine, bringing the sanctions issue back to the forefront. U.S. President Donald Trump expressed readiness to move into a new phase of sanctions, while David O’Sullivan, the European Union envoy, met with U.S. officials in Washington to coordinate an economic response.
Current European efforts are heading toward the 19th sanctions package, expected to target Chinese companies, Russian banks, and vessels from Russia’s “shadow fleet” used to evade sanctions. A direct ban on Russian oil transactions will also be imposed, which may impact Europe’s supply chains and create potential bottlenecks next winter.
Notably, Washington has not yet joined the G7 in lowering the price cap on Russian oil to $47.60, but it has imposed tariffs on Indian imports due to India’s continued purchases of Russian energy, while sparing China from similar measures. This reflects a fragile political balance in managing strategic alliances.
The U.S. dollar has recently weakened after weak employment data, prompting markets to price in an almost 89% chance of a rate cut at the upcoming Federal Reserve meeting. This monetary shift could provide a dual boost to oil prices by stimulating U.S. economic activity on the one hand, and strengthening investor appetite for dollar denominated oil on the other.
As a result, the short-term price outlook is poised to benefit from three factors:
- The anticipated interest rate cut.
- Geopolitical escalation and supply risks.
- OPEC+’s cautious supply management.
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