OPEC+ Faces Internal Strains as Geopolitical Tensions and Surplus Threaten Market Stability

Amid signs of a looming oil surplus, OPEC+ is maintaining its plan to gradually restore oil production by the end of the year. The alliance of 23 members announced no changes following an online meeting of its monitoring committee. OPEC+ is set to increase production by 180,000 barrels per day in December, delayed by two months from the original schedule. Recent geopolitical tensions, such as Iran's attack on Israel, have driven oil prices up by over 5% in the past two days, posing economic pressure on OPEC and its allies despite offering some relief to consumers and central banks contending with inflation.

While there is a clear commitment to the agreement among members like Iraq, Kazakhstan, and Russia, these countries continue to exceed their production quotas and have yet to implement additional cuts to offset previous overproduction. This instability within the agreement highlights challenges OPEC+ faces in maintaining discipline among its members, which could further impact market sentiment and pricing stability.

Despite geopolitical risks, forecasts for oil prices remain dampened due to weak demand and abundant supply. Analysts have revised their expectations, predicting a global supply surplus and further pricing pressure. The expected easing of production cuts in December aligns with these projections, but the group's persistent internal failures to adhere to production limits cast a shadow over the effectiveness of such plans.

In the wider context, while global competition intensifies with countries like the U.S., Guyana, and Brazil planning production increases, OPEC+'s grip on market share continues to dwindle. This is a significant concern as the group’s production cuts have already reduced their market influence, and further tension among members could lead to a reevaluation of their strategies to maintain market share and stabilize prices effectively.

As market conditions fluctuate, analysts caution that any escalation in geopolitical tensions, particularly in the Middle East, could unexpectedly boost prices. However, a weak demand outlook and sufficient supply are anticipated to keep prices under downward pressure, challenging OPEC+'s efforts to maintain equilibrium in the global oil markets.