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Commodities

CAN BRENT SUSTAIN ABOVE 70

ADMIN || 29th September 2025

Brent prices are currently trading a tad below 70. Reuters reported yesterday that OPEC+ is likely to approve another production boost of at least 137,000 barrels per day at its next meeting on 5th Oct. The Organization of the Petroleum Exporting Countries and its allies have started to revive a new layer of halted output, amounting to 1.66 million barrels a day, in monthly stages despite warnings from across the oil industry of an impending surplus.

But Saudi has market share at it’s focus now. And even with all the output increases i.e. 2.2 mbpd earlier and now the part wise increment of the 1.66 mbpd, brent prices have not fallen off the cliff. Although oil inventories are rising across the globe, China buying significantly for it’s SPR as well as the geopolitical risk premium of Russia Ukraine war is supporting Brent prices.

By letting OPEC+ open the taps, Saudi also seeks to demonstrate to oil traders that the group’s other members have considerably less spare production capacity than was generally assumed, shaking out any complacency in the market.

A demonstration of this dynamic came this week, as Iraq finally reached an agreement to restart exports through an oil pipeline from its semi-autonomous Kurdish region, shuttered for more than two years.  Yet oil prices largely shrugged off the news, as traders suspected that most of the halted production had already been diverted to domestic consumption or nearby countries.

Markets also expect that roughly half of the advertised volume of last month’s 137,000 bpd will be delivered, as some members atone for earlier overproduction and others struggle to increase due to financial constraints or international sanctions.

Reviving the 1.66 mbpd tranche would enable Saudis to add 730,000 barrels a day. While the others would be allowed to add about 800,000 a day, they lack the spare capacity needed to boost supplies that much.

So, in nutshell the actual increase in supply is half of announced while geopolitical risk premium (sanctions on Russia and Ukraine attacks on Russian oil fields) is keeping Brent elevated. But that does not take away the fact that there is a global inventory buildup happening because of demand supply mismatch.

Hence for Brent to sustain above 70 levels might need another fresh round of flare ups in Russia Ukraine war or NATO getting involved in one way or another with Russian attacks on Ukraine or a new round of sanctions on Russian crude supplies to China/EU. Till then Brent will oscillate between 65-70 but as risk premium goes down if the war does not escalate by Dec’25, physical demand supply equation will come into prominence taking Brent to sub 60 levels.

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