The Organisation of Petroleum Exporting Countries and its allies (OPEC+) face a difficult decision on production policy for 2027 as uncertainty over the US-Iran conflict, the fragile recovery of crude shipments through the Strait of Hormuz and the prospect of a global oil supply glut complicate the outlook for the international petroleum market.

Although seven key members of the alliance have maintained their December production targets for the third consecutive month, attention is shifting to the November 29 ministerial meeting, when the wider 21-member group is expected to determine its production framework and quotas for next year.

The decision will have far-reaching implications for global oil supply, market stability and crude oil prices, particularly as the return of disrupted Middle Eastern barrels could significantly alter the balance between supply and demand.

The immediate challenge for OPEC+ is that geopolitical disruptions are currently masking underlying weaknesses in the global oil market. While the US-Iran confrontation and insecurity around the Strait of Hormuz have constrained crude exports from the Gulf, a sustained recovery in shipping flows could release substantial volumes into the market, potentially creating an oversupply situation.

This leaves the alliance facing a delicate balancing act: determining how much additional production it can accommodate in 2027 without triggering a supply glut and a consequent decline in crude prices.

The difficulty is compounded by uncertainty over how quickly exports through the Strait of Hormuz will recover, the extent to which Iran and the United States could reach an accommodation, and the volume of crude that could return to international markets once disrupted supply routes become more accessible.

Rystad Energy, which has revised its outlook for the recovery of Middle Eastern oil exports, warned that OPEC+ faces an extremely difficult production decision because of the uncertainties surrounding the conflict and the potential scale of additional supply.

The energy research firm observed that the alliance’s decision to maintain December production levels was relatively straightforward, but the November 29 meeting would present a much more consequential test.

According to Rystad Energy analyst Jorge Leon, the group must determine its 2027 production framework without knowing precisely how quickly Middle Eastern supply will normalise or how much surplus could emerge when disrupted barrels return.

The seven core OPEC+ members — Saudi Arabia, Russia, Iraq, Kuwait, Algeria, Kazakhstan and Oman — announced their decision to maintain September 2026 required production levels for December following a virtual meeting on November 1.

The decision was widely anticipated, with the seven countries having already maintained their production targets for October and November.

The remaining members of the 21-country alliance are expected to join the November 29 ministerial meeting, where attention will turn to production allocations and the framework for managing supply in 2027.

The seven countries had progressively increased their production targets through much of 2026, completing in September the phased reversal of a 1.65 million barrels per day voluntary production cut introduced in 2023.

However, another layer of production cuts amounting to approximately two million barrels per day, covering most members of the alliance, remains in place through the end of 2026.

Before establishing new production baselines for 2027, OPEC+ must also complete a review of members’ production capacities. The exercise is expected to be concluded by mid-November, having been complicated by disruptions to capacity expansion projects across the Middle East.

The outcome will help determine individual production allocations and the pace at which remaining supply restrictions could be unwound.

Hormuz recovery remains uncertain

A major consideration in the 2027 production outlook is the future of crude oil shipments through the Strait of Hormuz, one of the world’s most strategically important energy transportation corridors.

Rystad Energy has revised its September outlook, moving away from expectations of a full recovery in Gulf crude exports during 2027 towards a scenario of fragile, partial recovery.

The research firm now expects oil shipments through the waterway to increase gradually over the coming year without returning fully to pre-war conditions.

Its revised assessment reflects the growing disconnect between improving export volumes and deteriorating maritime security.

Although crude shipments have recovered considerably from the lowest levels recorded during the conflict, attacks on commercial vessels have intensified, while freight and insurance costs have risen sharply.

Total Gulf crude exports averaged approximately 12 million barrels per day in September and during the first 20 days of October, significantly above the lows recorded earlier in the conflict but still below the pre-war average of about 18 million barrels per day.

Rystad Energy reported that weekly vessel disruptions increased to 10 incidents and subsequently 16, including 13 within the Strait of Hormuz. The following week recorded 11 incidents, eight of which occurred within the waterway.

Although only four incidents were recorded between October 19 and 26, the firm cautioned that the figure was preliminary and should not be interpreted as evidence of a meaningful improvement in maritime security.

It also warned that reported incidents could underestimate the actual scale of disruption because shipowners and operators may be reluctant to disclose attacks or near misses for commercial, insurance or security reasons.

The research firm linked the escalation in attacks to the gradual recovery in maritime traffic, arguing that Iran could be seeking to preserve its strategic leverage over the waterway as commercial operators and Gulf producers become increasingly willing to resume shipments.

According to its assessment, Tehran does not necessarily need to shut down the Strait of Hormuz completely to maintain that leverage. Periodic attacks could be sufficient to raise the perceived risks of passage, increase transportation costs and discourage shipowners and insurers from treating the recovery as permanent.

The economic consequences are already evident in shipping markets, with day rates for very large crude carriers operating from the Gulf rising to approximately nine times their pre-war levels.

This means that even as physical crude supply improves, elevated freight, insurance and security costs will continue to affect the economics of petroleum exports and the prices ultimately paid by international buyers.

Fragile recovery to shape 2027 supply

In its revised base-case outlook, Rystad Energy expects a limited accommodation between Washington and Tehran to emerge towards the end of the first half of 2027, although the underlying confrontation would remain unresolved.

The anticipated understanding would be closer to a tacit arrangement than a comprehensive political settlement.

Under this scenario, Washington could become more tolerant of increased commercial passage through the Strait of Hormuz and less aggressive in enforcing some restrictions, while Tehran could reduce the frequency or intensity of attacks sufficiently to permit higher export volumes.

Commercial operators would also continue adapting to the higher-risk environment, becoming increasingly willing to move crude despite elevated freight, insurance and security costs.

Rystad describes this outcome as “pseudo-normalisation”, whereby the conflict persists and major political disagreements remain unresolved, but both sides increasingly tolerate an operating environment that allows substantially higher volumes of crude to move through the region.

The firm considers this its most likely scenario for 2027, representing a shift from its earlier expectation that Gulf exports would eventually return fully to normal during the year.

Under the revised projection, crude exports through the Gulf and Saudi Arabia’s western export route through Yanbu would recover to approximately 18 million barrels per day by July 2027, close to but still below the pre-war combined level of about 19 million barrels per day.

Yanbu, which provides an alternative export route that reduces Saudi Arabia’s dependence on the Strait of Hormuz, recorded increased loadings from approximately two million barrels per day in September to three million barrels per day in October.

However, the volumes remain below the approximately four million barrels per day recorded during much of the early part of the year.

Rystad expects Yanbu loadings to remain around current levels through much of 2027, reaching approximately three million barrels per day by July.

The research firm also outlined two alternative scenarios that could significantly alter the global oil supply outlook.

Under its full-normalisation scenario, sustained military de-escalation and a broader political and security breakthrough between the United States and Iran would restore confidence among shipowners, insurers and commercial operators.

Such an outcome would require substantial progress on Iran’s nuclear programme, sanctions, regional proxy activities and maritime security, alongside credible measures to address Israeli security concerns.

If these conditions were achieved, Gulf crude exports could recover towards 18 million barrels per day early next year and approximately 20 million barrels per day by July.

Saudi Arabia would gradually redirect some shipments away from its western export route as the Gulf passage became more reliable, reducing Yanbu loadings towards two million barrels per day.

Combined Gulf and Yanbu exports could consequently reach approximately 21 million barrels per day by July 2027.

Such a recovery would significantly increase the volume of crude available to international markets and heighten the possibility of a supply surplus, particularly if global demand fails to expand at a corresponding pace.

At the other extreme, Rystad’s permanent-disruption scenario assumes that recurring attacks, restrictions on maritime passage and persistent security risks prevent a sustained return to conventional commercial operations.

Under this scenario, Gulf crude exports could fall towards nine million barrels per day before gradually recovering to approximately 10 million barrels per day by July 2027.

Yanbu shipments would remain constrained at about two million barrels per day, leaving combined exports close to 12 million barrels per day by July.

The firm, however, stressed that permanent disruption would not necessarily mean a complete closure of the Strait of Hormuz or an absolute inability to transport crude from the Gulf. Rather, it would represent a prolonged period of constrained shipping, recurring attacks and commercial adaptation to elevated risks.

Implications for oil prices and OPEC+ strategy

The competing scenarios present significant implications for crude oil prices and the ability of OPEC+ to manage global supply.

A sustained recovery in Gulf exports could increase the availability of crude, ease supply constraints and place downward pressure on international oil prices, particularly if additional barrels return faster than demand expands.

Conversely, continued disruption around the Strait of Hormuz could sustain supply concerns, increase transportation and insurance premiums and keep crude prices elevated despite improvements in production elsewhere.

The immediate market reaction reflects the sensitivity of oil prices to geopolitical developments. Brent crude rose by more than two per cent on October 30, settling close to $118 per barrel, its highest level since April, as traders anticipated possible escalation in the Iran conflict following the US midterm elections in early November.

However, the International Energy Agency and other market forecasters have warned that the global oil market could face excess supply in 2027 if Middle Eastern exports return towards normal levels.

This prospect places additional pressure on OPEC+ to determine whether to resume production increases, maintain existing restrictions or adopt a more cautious approach until the geopolitical outlook becomes clearer.

For the alliance, increasing production too quickly could compound an emerging surplus and weaken prices, while maintaining restrictive quotas for too long could leave members unable to maximise export revenues when market conditions improve.

The challenge is particularly significant because the production capacity review required for the 2027 quota framework is itself being affected by the conflict, which has disrupted projects intended to expand output capacity across the Middle East.

Consequently, the November 29 meeting will involve more than determining individual production allocations. It will require the alliance to make strategic assumptions about the future availability of crude, the resilience of global demand and the extent to which geopolitical risks will continue to constrain international petroleum trade.

For now, Rystad Energy expects Gulf exports to recover substantially next year, but within a less secure commercial and geopolitical environment than existed before the conflict.

Its central outlook is therefore one of fragile pseudo-normalisation rather than a comprehensive return to normality.

The implication is that global oil markets may have to contend with two competing forces in 2027: the return of previously disrupted crude supplies, which could create downward pressure on prices, and persistent geopolitical and maritime security risks, which could continue to impose substantial premiums on petroleum transportation and trade.

For OPEC+, navigating these competing pressures will be central to its efforts to maintain market stability and protect the revenue interests of its members in the coming year.

The November 29 ministerial meeting will therefore be a defining moment for the alliance as it determines how much additional crude it can safely introduce into an international market whose supply outlook remains heavily dependent on developments in the Persian Gulf.