By Myra P. Saefong
OPEC+ has been ‘swinging an axe [at] oil prices’ each time it announces output increases, says Velandera’s Manish Raj
OPEC+ is scheduled to decide Sunday on oil-production quota levels for November.
The major crude-oil producers known as OPEC+ are expected to agree to another monthly hike in oil-output quotas at a meeting this week – despite expectations for a global supply surplus this year and next.
Oil prices on Friday tallied their biggest weekly loss since late June. The price drop shows that “surplus fears are back in charge,” said Stephen Innes, managing partner at SPI Asset Management.
On Friday, U.S. benchmark West Texas Intermediate crude for November delivery (CLX25) (CL.1) settled at $60.88 a barrel on the New York Mercantile Exchange, down 7.4% for the week, according to Dow Jones Market Data. Global benchmark December Brent (BRNZ25) (BRN00) ended at $64.53 on ICE Futures Europe, for a weekly loss of 6.8%.
Oil prices are lower because “traders can see the seasonal-demand air pocket,” said Innes – referring to the time of year when demand for oil tends to slow and inventories start to tick higher.
“No one’s chasing scarcity [in supply] here. The market’s leaning into the surplus story,” he added.
‘No one’s chasing scarcity [in supply] here. The market’s leaning into the surplus story.’Stephen Innes, SPI Asset Management
Forecasts from the International Energy Agency show that global oil supplies are poised to outpace global demand in 2025 and 2026. But at a meeting Sunday, OPEC+ – comprised of members of the Organization of the Petroleum Exporting Countries and their allies – is expected to boost crude-production quotas for November, according to the CME’s OPEC+ Watch Tool.
At a meeting in early September, the group lifted its output quotas for October by 137,000 barrels per day. It had been announcing monthly increases since April, to lift its quotas by a total of about 2.5 million barrels per day through September.
Token moves
October’s hike was a “token move,” because the bigger issue is that quotas “haven’t been barrels for a while,” said Innes, explaining that OPEC+ has been producing oil below its quota levels all year. Members have managed to produce “only about three-quarters of what’s promised,” he noted, leaving “a half-million-barrel hole between paper targets and wet [actual oil] cargoes.”
“Unless Riyadh or Abu Dhabi open the taps wider, any November increase is just another headline that doesn’t move actual flows,” Innes said.
The International Energy Agency said in a monthly report that as of September, OPEC+ will have ramped up actual crude output by 1.5 million barrels per day since the first quarter of 2025, which would be well below the announced target of 2.5 million barrels per day.
OPEC+ has been ‘swinging an axe [at] oil prices each time it announces production increases.’Manish Raj, Velandera Energy Partners
Still, OPEC+ has been “swinging an axe [at] oil prices each time it announces production increases,” said Manish Raj, chief financial officer at Velandera Energy Partners.
So far this year, U.S. oil futures have lost 15.1%, while Brent crude is down by 13.6%.
Not all OPEC producers have spare capacity, but Saudi Arabia, the United Arab Emirates, Kuwait and Iraq “definitely have barrels to unload,” Raj said. There are also likely to be “substantial barrels” coming from newly reopened wells in Kurdistan, where Iraq resumed crude exports in late September after a more than two-year halt, according to a report from Barron’s.
At the same time, U.S. shale drillers are “pushing the envelope on production,” said Raj. Rising rig counts are U.S. drillers’ “way of saying that when the going gets tough, the tough get going, he noted, adding that oil at around $60 a barrel is “lucrative enough” for U.S. shale to stay busy.
‘Test of OPEC+ intentions’
Michael Lynch, president of Strategic Energy & Economic Research, believes that the meeting of major oil producers this weekend is a “test of OPEC+ intentions.”
They can “forego an increase very easily, since most can’t raise production anyway,” he said. Given the U.S. government shutdown, economic uncertainty and the recent drop in prices, “that might be the way to go,” said Lynch, and would suggest that they “at least want to put a floor on prices.”
However, if they increase production quotas anyway, that would imply that they “aren’t concerned about current and potential price weakness,” he added, and that the Saudis potentially see the new Kurdish production as worrisome, as it implies Iraq is going to continue violating its quotas.
A minor increase wouldn’t really deal with that potential issue, but “could signal Saudi intention to let prices run their course as long as some members don’t cooperate,” Lynch said.
-Myra P. Saefong
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10-03-25 1533ET
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