Due to poor global economic prospects and low oil prices, OPEC+ has once again postponed plans to resume oil supplies. Led by Saudi Arabia and Russia, OPEC+ originally planned to increase production by 180,000 barrels per month starting in December. However, the organization announced on Sunday that it will maintain its current supply restrictions throughout December. This is the second time OPEC+ has delayed its planned production increase, demonstrating the organization's choice to continue a cautious supply control strategy amid global economic weakness and pressure on oil prices.
Oil prices have fallen sharply over the past four months, with Brent crude futures now down to around $73 per barrel. This price level is well below the fiscal breakeven point required by Saudi Arabia and other OPEC+ oil-producing countries. Saudi Arabia's ambitious economic plans and Russia's geopolitical spending are both under pressure. According to analysts, the Saudi government needs oil prices close to $100 per barrel to support Crown Prince Mohammed bin Salman's Vision 2030 reform plan, while Russia requires stable oil revenues to support expenditures related to the Russia-Ukraine conflict.
On the demand side, the oil market is affected by both economic weakness and regional supply-demand imbalances. China's oil demand has been shrinking for four consecutive months, while oil supply in the Americas, particularly in the United States, continues to rise. In August, U.S. crude oil daily production climbed to 13.4 million barrels, hitting a record high. According to the International Energy Agency, even if OPEC+ does not increase production, the global oil market will still face a supply surplus next year. Additionally, Citigroup and JPMorgan predict that oil prices may drop to $60 per barrel by 2025.
Nevertheless, geopolitical risks and the macroeconomic situation continue to make the market full of uncertainty. Tensions between Iran and Israel, along with the upcoming U.S. presidential election, make OPEC+'s supply strategy particularly crucial. Analysts point out that delaying the production increase plan aims to stabilize oil inventories to avoid market oversupply.
However, OPEC+ is also facing challenges in implementing its production reduction agreement, with some member countries—particularly Russia, Iraq, and Kazakhstan—repeatedly exceeding their quotas. Although these three countries have pledged to intensify production cuts to make up for the overproduction, implementation is less than ideal. The 23 member countries of OPEC+ are expected to review policies again at a meeting on December 1 and formulate supply plans for 2025. The market will closely watch whether new supply measures will be introduced at that time.
