Oil Prices Fall on Oversupply Concerns After OPEC+ Output Decision
Oil prices slipped on Tuesday as investors interpreted OPEC+’s decision to pause output hikes in the first quarter as a sign that the market may be facing a potential oversupply.
By 07:00 GMT, Brent crude futures were down 37 cents, or 0.6%, trading at $64.52 a barrel, while U.S. West Texas Intermediate (WTI) also fell 37 cents, or 0.6%, to $60.68 a barrel.
OPEC+ Pauses Output Hikes
Over the weekend, the Organization of the Petroleum Exporting Countries (OPEC) and its allies, collectively known as OPEC+, agreed to a small oil production increase in December followed by a pause in output hikes during the first quarter of next year.
Since April, the alliance has raised output targets by roughly 2.9 million barrels per day, equivalent to about 2.7% of global supply. However, it began slowing the pace of production in October amid forecasts of rising inventories and potential oversupply in early 2025.
According to Suvro Sarkar, energy sector team lead at DBS Bank, the move could signal a shift in sentiment within OPEC+.
“The market may see this as the first acknowledgment of a potential oversupply situation from OPEC+, which until now remained very bullish on demand and the market’s ability to absorb extra barrels,” Sarkar said.
Mixed Views on Supply Outlook
Despite concerns of a looming glut, European energy executives pushed back against predictions of a major oversupply, citing steady global demand and declining production elsewhere.
Meanwhile, U.S. Department of Energy Deputy Secretary James Danly stated he does not expect an oil glut in 2026, suggesting a more balanced long-term outlook.
The decision to pause output increases reportedly came after Russia urged for the move, citing challenges in boosting exports due to Western sanctions. Both the U.S. and the U.K. imposed new sanctions in October on Russian oil giants Rosneft and Lukoil.
Analysts Expect Near-Term Support
In a note to clients, JP Morgan said its strategists believe recent Western sanctions are unlikely to prevent Russian producers from operating, though they may increase short-term risks to global supply chains.
Independent analyst Tina Teng added that while oil prices are currently under pressure, sanctions could provide near-term support by limiting Russian output and tightening supply.
Traders are now awaiting the latest U.S. crude inventory data from the American Petroleum Institute (API), expected later in the day. A Reuters poll suggests that U.S. crude stockpiles likely increased last week, potentially adding to the market’s cautious tone.
