NEWS

The Organization of the Petroleum Exporting Countries (OPEC) and its partners in the OPEC+ alliance face a complex challenge regarding oil production policies, as the balance between crude oil supply and demand remains unstable. With ongoing economic volatility, the decision to ease oil production restrictions becomes increasingly difficult.

According to Reuters reports, despite pressures to maintain oil price stability, OPEC+ risks losing control over the global oil market.

Currently, OPEC+ maintains a production cut of 5.85 million barrels per day (bpd), equivalent to approximately 5.7% of global demand, as part of its strategy to support oil prices.

These cuts have been in place since 2022, with initial plans to phase out 2.2 million bpd of these reductions in Q1 2024. However, implementation has been postponed five times due to weak demand and rising global oil production. The current plan aims to gradually lift production cuts starting in April 2025.

Market conditions are unlikely to improve by then and may worsen due to global trade tensions between the United States and major economies, which could restrain oil demand growth. At the same time, U.S. President Donald Trump has pushed for lower global oil prices, amid speculation about a possible peace agreement in Ukraine, which could lead to an easing of sanctions on Russian oil production.

Over the past few years, OPEC+ has managed to maintain relative stability in Brent crude prices, which have ranged between $70 and $100 per barrel since 2021, despite periods of sharp fluctuations.

However, with continued production restrictions, OPEC’s market share has declined while U.S. oil production and output from non-OPEC members have increased. The U.S. Energy Information Administration (EIA) expects U.S. oil production to reach a record 13.6 million bpd by 2025, with global oil production projected to grow by 1.6 million bpd that same year.

OPEC+ is also facing internal challenges, as the expansion of the Tengiz oil field in Kazakhstan, led by Chevron, is expected to boost production, potentially requiring deeper cuts within the alliance.

Additionally, Nigeria has increased its oil output, while Iraq’s Kurdistan region is preparing to resume 300,000 bpd exports after a two-year suspension. Meanwhile, the United Arab Emirates (UAE) has expanded its production capacity to nearly 5 million bpd.

The International Energy Agency (IEA) forecasts that oil supply growth will surpass global demand, which is expected to rise by 1.1 million bpd in 2025.

This situation could lead to rising oil inventories, forcing OPEC+ to make a critical decision: either extend production cuts, potentially straining relations with some members, or increase output in an already oversupplied market, risking a decline in oil prices. The group's decision could have long-term implications for OPEC+’s market share and future strategies.