Sopuruchi Onwuka
Members of the Organization of Petroleum Exporting Countries and nonmember allies (OPEC+)are billed to pump in significant 137,000 barrels per day of new supply into the increasingly bearish oil market, heightening concerns that possible supply surge would dilute the prices of the commodity.
The new supplies scheduled for October comes despite widespread expectations that the group would hold output flat to cushion prices against an already oversupplied market for the fourth quarter of the year.
Chief Economist at Rystad Energy, Claudio Galimberti, stated in the company’s oil market update that “Riyadh and its allies signaled a decisive pivot: defending market share now outweighs defending prices.”
He noted that OPEC+ is playing offense by allowing supply back into a market moving toward surplus, adding that the production increase have a strong message for traders even when the headline volume may look marginal.
However, structural capacity constraints mean that only Saudi Arabia, the UAE, and Iraq can primarily deliver significant volume uptick, and the compensation mechanism will further cap net additions.
Rystad stated that the psychological signal that OPEC+ is prepared to tolerate softer prices to secure long-term relevance has reset expectations heading into the fourth quarter.
Rystad which provides market intelligence for global industry players band traders stated that the move by OPEC+ comes at time of renewed competition for market share amid weakening demand as Russia pushes for more revenue and gulf nations push for long term market dominance.
“Beneath the surface, fault lines within OPEC+ are widening. For Russia, every extra dollar matters as crude revenues prop up its budget and offset sanctions-driven strain. Gulf producers, by contrast, are playing a longer game. Saudi Arabia and the UAE are betting that near-term revenue pain is worth locking in market share in the years ahead, particularly as global oil demand growth slows.
“For now, the Gulf camp is setting the script, and Moscow is playing along. At the same time, it is worth paying attention to the development in the Caribbean, where the US administration has been targeting vessels and will, in the future, potentially target aircraft from Venezuela when suspected of carrying drugs. A military confrontation between the two countries would be a significant source of geopolitical risk in the region and for the oil markets,” Rystad noted.
“For oil markets, the next seven days are about how traders digest OPEC+’s pivot. Expect Brent price volatility as the market reprices its balance narrative: softer prices are tolerated, but OPEC+’s grip on swing supply remains firm,” the company said.