A group of eight countries belonging to the oil cartel known as OPEC Plus said on Sunday that it would increase oil production by 137,000 barrels a day beginning in December, but signaled caution about its next steps in the face of concerns about oversupply.
The group, in a surprise, said that it would “pause” adding oil for the first three months of next year and that it would closely monitor market conditions and maintain “full flexibility” in deciding whether to continue pausing production increases or even resume cuts.
In a news release, the group attributed the temporary halt to “seasonality.” Indeed, demand for crude oil tends to drop in the first quarter as refineries reduce runs. “They don’t want to add barrels in a seasonally weak market,” said Amrita Sen, the director of market intelligence at Energy Aspects, a research firm.
But perhaps more significant, the announcement seems to indicate that the group, which sells enormous volumes of oil to major importing countries like China and India, is picking up signs that there are risks of an oversupply next year.
“They do their own balances, and their balances are also showing builds” in the first quarter, Ms. Sen said.
“Staying put will definitely give them better visibility over market fundamentals,” said Bachar EL-Halabi, a senior energy markets analyst for Argus Media, a research firm.
OPEC Plus is maneuvering against a complex backdrop. There are now questions about future exports from Russia, a key supplier, after Washington recently sanctioned two Russian oil companies. Tension is also building between the Trump administration and Venezuela, a substantial oil producer.
On the other hand, concerns have emerged that oil supplies are growing much faster than demand, potentially leading to a surplus that would be difficult to manage.
“The global oil market may be at a tipping point as signs of a significant supply glut emerge,” Toril Bosoni, the head of the oil industry and markets division at the International Energy Agency in Paris, wrote in an analysis this month.
Ms. Bosoni said that the unwinding of production cuts by OPEC Plus along with continued increases by countries outside the group, including the United States, Canada and Guyana, would lead to supply outstripping demand by nearly 4 million barrels a day, or more than 4 percent in 2026.
She said in an email that the large difference between output and consumption was “untenable,” suggesting that some sort of course correction was likely to occur.
OPEC Plus might cut back, for instance, or lower prices might lead the United States and other producers to reduce production, or sanctions on Russia, Iran or Venezuela might cut into supplies.
Some industry leaders echo these concerns. On Thursday, Wael Sawan, the chief executive of Shell, told analysts that there was “a highly credible scenario” of “an oversupply in 2026.”
Until recently, Saudi Arabia, which leads the group, seemed to shrug off such worries.
The Saudis, who are largely in control of these decisions, are trying to achieve a delicate balance between continuing to unwind the layers of production cuts the group previously agreed on while not spooking the market .
By increasing output modestly, the Saudis also appear to be splitting the difference between keeping in the good graces of President Trump, who has forged a close relationship with Riyadh, while keeping their partners in OPEC Plus on board.
.
The other members of the group of eight include Iraq, the United Arab Emirates, Kuwait, Kazakhstan, Algeria and Oman.
So far, the markets are not behaving as though there is a glut. For instance, Brent crude is trading somewhat higher for December than later dates. This pattern, known as backwardation, suggests that there is substantial demand for crude and that “global oil markets may be tighter than they appear,” analysts at J.P. Morgan wrote in a research note on Thursday.
Stanley Reed reports on energy, the environment and the Middle East for The Times from London. He has been a journalist for more than four decades.
The post OPEC Plus Signals Cautious Approach to Oil Production appeared first on New York Times.
