OPEC+ Nears Its Limit, Leaving Prices One Crisis Away from a Spike
- OPEC+ spare capacity is shrinking fast, with only Saudi Arabia, the UAE, and Iraq holding meaningful extra production capability.
- Analysts warn that actual spare capacity may be overstated.
- As OPEC+ unwinds its remaining cuts and producers hit physical limits, the world’s oil buffer is thinning.
The OPEC+ group continues its cautious strategy of returning modest volumes of supply to the market, a move cemented by the decision on October 5 to implement another 137,000 barrels per day (bpd) production hike for November. This measured approach aims to avoid sinking oil prices, which currently hover around the mid-$60s per barrel, as post-summer demand weakens and forecasts warn of an impending supply glut in 2026.
Crucially, the actual supply increases are still falling short of the headline figures, many producers lack the capacity to boost output further, while others are compelled to compensate for previous overproduction, confirming the deepening concerns about the group's diminishing spare capacity.
While the lower-than-planned production increases support oil prices, they also reduce the spare capacity of the OPEC+ producers. Not that many of them have any meaningful spare production capacity. Except for Saudi Arabia, the United Arab Emirates (UAE), and Iraq, the other members of the OPEC+ alliance are likely maxed out, leaving the market in a precarious position when the next supply shock occurs. This could emerge with another flare-up in the Middle East or more sanctions on Russia or Iran. Read more
By Tsvetana Paraskova for Oilprice.com