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OPEC+ FINALLY RECOGNISES THE SUPPLY GLUT

ADMIN || 3rd November 2025

The Organization of the Petroleum Exporting Countries and its allies said on Sunday they would raise crude production by about 137,000 barrels a day in December, matching increases scheduled for October and November, then take a January-to-March break. The eight OPEC+ members, which include heavyweights Saudi Arabia and Russia, have now raised output targets by about 2.9 million bpd, about 2.7% of global supply, since April. But finally, the group has recognised the supply glut globally and decide to halt on output increases.

Thought the recent US sanctions on Russian oil companies Rosneft & Lukoil has led to an uptick in Brent prices above 65, it is yet to be seen how much of Russian crude exports actually get impacted.

Any decline in physical exports is expected to be temporary as trade flows adjust within a quarter. We still don’t see any clear mechanism of enforcement. The number of US OFAC sanctions designations has grown exponentially, rising from 912 in 2000 to over 18,200 today. The scale of existing sanctions has fostered the emergence of alternative financial, insurance, and shipping systems that are becoming increasingly lucrative. Russia has developed its own maritime insurance solutions and the size of the shadow fleet has nearly quadrupled since 2022, now representing almost 20% of the global oil tanker fleet.

If the sanctions on the 2 Russian oil companies were to be successful, the full 2 mbpd of Russian crude & 1mbpd of Russian crude products would have gone off line. But we believe the real decline in Russian exports could be in the range of .5-.6 mbpd only.

Coming back to OPEC+ yesterday decision, while it is correct that the first quarter tends to be softer from a demand perspective, but it's also likely that OPEC+ is putting a positive spin on what is an uncertain outlook for both global oil demand and supply. Both OPEC & IEA have diverging views on next year demand supply equation.

OPEC's monthly report in October forecast 2026 oil demand growth at 1.38 million bpd and that demand and supply growth will be largely balanced. The IEA expects 2026 demand to rise by 700,000 bpd but a surge in supply will lead to a surplus of as much as 4 million bpd, the agency said in its October monthly report. Most oil market analysts sit somewhere between OPEC and the IEA, with a Reuters poll in September showing an expected surplus of 1.6 million bpd in 2026.

To us, OPEC has finally recognised the possible supply glut in Q1CY26 itself since Russian crude supplies will have adjusted by then. We expect brent to range between 60-70 for next few months.

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