OPEC+ shifts strategy amid growing oil glut

In a shift of strategy, OPEC+ decided to pause further oil production hikes after December, citing "seasonality" and slowing global consumption.

The move comes after months of ramping up crude output, aimed at regaining market share lost to US shale producers. At a meeting on November 2, the alliance confirmed a modest supply boost for December but will hold steady through Q1 of 2024, Bloomberg reports. 

The decision aligns with forecasts from the International Energy Agency (IEA), which warns of an emerging supply glut next year as new oil from the Americas outweighs global demand.

Current stockpiles, including over 1 billion barrels stored on tankers, suggest the surplus is already taking shape, with crude prices hovering around $65 a barrel—well below levels needed for many OPEC+ members, including Saudi Arabia, to balance budgets.

While "seasonality" was cited as the official reason, financial concerns are likely driving the pause, reminiscent of the 2014-2016 period when Saudi Arabia's push for market share led to a price slump.

Additionally, political factors, such as Russia's strained oil sector amid Western sanctions, could have played a role in the decision, potentially leading Moscow to advocate for the slowdown.

As market conditions worsen and surpluses grow, the key question remains whether OPEC+ will take further steps to reduce output, according to Bloomberg’s analysis.

By Sabina Mammadli