Background on OPEC+
OPEC+, comprising the Organization of the Petroleum Exporting Countries (OPEC) and allied producers, agreed on Sunday to increase production by 137,000 barrels per day (bpd) in December. The group also decided to pause production increases in the first quarter of 2026.
Market Reactions
On Monday, oil prices remained stable as the market sought balance between OPEC+’s recent supply increase and their plans to halt production hikes early next year. Concerns about excess oil supply and weak manufacturing data from Asia also influenced the market.
- Brent Futures: Rose 0.19% to close at $64.89 per barrel.
- West Texas Intermediate (WTI): Increased by 0.11% to close at $61.05 per barrel.
- Mexican Export Blend: Fell 0.43% to close at $58.17 per barrel.
Analyst Insights
Ritterbusch and Associates, an energy consulting firm, noted that any negative impact on prices from OPEC+’s 137,000 bpd production increase this quarter was offset by the cartel’s suggested pause in production advances after the end of the year.
Morgan Stanley raised its Brent crude forecast for the first half of 2026 to $60 per barrel from $57.50, citing OPEC+’s decision to pause next year’s quota increases and recent events related to Russian oil assets.
The International Energy Agency (IEA) warned of a potential surplus of up to 4 million barrels per day next year. OPEC expects global oil supply and demand to balance in the coming year.
European oil company executives, gathered at a conference in Abu Dhabi, cautioned against being overly pessimistic about oil. RBC analysts highlighted Russia as a major unknown in energy supply following U.S. sanctions on Russian producers Rosneft and Lukoil, as well as attacks on energy infrastructure.
Asian Manufacturing Slowdown
October saw continued challenges for major Asian manufacturing hubs. Asia is the world’s largest oil-consuming region.
China’s crude demand growth has slowed since 2020 as the country transitions to cleaner energy sources, according to major oil company TotalEnergies. CEO Patrick Pouyanne expressed optimism about long-term demand due to increased demand in India.
Dollar’s Impact on Oil Prices
The strong dollar put downward pressure on oil prices, making crude more expensive for buyers using other currencies. The dollar remained near its highest level in three months relative to a basket of currencies.
Key Questions and Answers
- What is OPEC+? OPEC+, or the Organization of the Petroleum Exporting Countries Plus, is a grouping of OPEC members and allied producers, including Russia, that coordinate oil production policies to influence global oil prices.
- Why is the pause in production significant? The pause in OPEC+ production increases aims to prevent oversupply and stabilize oil prices amidst concerns about weak global demand and excess production.
- How does the strength of the US dollar affect oil prices? A stronger US dollar makes oil more expensive for buyers using other currencies, which can reduce demand and put downward pressure on prices.
- What are the implications of Russia’s role in energy supply? Following U.S. sanctions on Russian producers and attacks on energy infrastructure, Russia’s role in global energy supply remains uncertain, potentially impacting oil prices and availability.
