The Organization of the Petroleum Exporting Countries and allies offered yet another surprise at their last meeting over the weekend.
The cartel was expected to raise production for December, and it did so with a decision to hike output by 137,000 barrels per day next month.
However, its decision to pause any production increases during the first quarter of 2026 was the one, which caught the market’s attention.
“Yes, OPEC+ is blinking, but it’s a calculated move,” Rystad Energy’s head of geopolitical analysis, Jorge León, said in an emailed statement.
Sanctions on Russian producers have injected a new layer of uncertainty into supply forecasts, and the group knows that overproducing now could backfire later.
Sanctions
The Trump administration had announced “tremendous” new sanctions directly targeting two of Russia’s largest oil companies, Rosneft and Lukoil last month.
US President Donald Trump stated the move is intended to pressure Moscow to end its war in Ukraine.
According to US Treasury Secretary Scott Bessent, these corporations are key to funding the Kremlin’s “war machine.”
As the first direct intervention imposed by the Trump administration on Russia over the invasion, these measures are considered geopolitically significant.
According to Bloomberg estimates, almost 50% of Russia’s total crude-oil exports come from two companies: Rosneft, a state-controlled firm led by Igor Sechin (a close associate of Russian President Vladimir Putin), and Lukoil, which is privately owned.
The two companies collectively export 3.1 million barrels of oil daily.
Rosneft, by itself, accounts for nearly half of Russia’s total oil production, which the UK government estimates to represent 6% of the world’s output.
While acknowledging that the most recent US sanctions against two of Russia’s major oil companies were “serious,” Russian President Vladimir Putin nevertheless sought to minimise their impact, stating they were not strong enough to significantly affect the nation’s economy.
Moscow, intending to convey an image of stability and recognizing that any effect on Russian output will not be immediate, agreed to a further modest increase by OPEC+8.
“For the Kremlin, staying composed and signaling control remains central to its strategy,” Rystad Energy said.
OPEC’s surprise
The absence of a planned production increase for the first quarter of next year was unexpected.
The pause is explained by the seasonality of demand, according to Commerzbank AG.
“Demand usually weakens in the first quarter, which is why the oil market is likely to show a considerable oversupply already at the beginning of 2026,” said Carsten Fritsch, commodity analyst at the German bank.
OPEC+ attempted to dispel the impression that the suspension of production increases was due to concerns about oversupply.
The United Arab Emirates’ energy minister expressed skepticism about an oil oversupply next year, projecting instead that demand will be higher.
The oil market is anticipated to face an oversupply next year, a scenario that would not occur if it weren’t for shortfalls tied to sanctions, according to Fritsch.
Mixed signals
Conflicting indicators are currently present for oil demand.
For instance, a Bloomberg survey of market participants suggests that Saudi Arabia is expected to substantially cut its official selling prices for Asian oil shipments in December.
The significantly increased supply from Saudi Arabia is only selling at lower prices, which implies a weaker underlying demand.
In a shift from previous trends, Reuters, citing informed sources, indicated that US sanctions are prompting Indian and Turkish refineries to increase their procurement of non-Russian oil.
This sourcing is reportedly concentrated in the United Arab Emirates, Iraq, and Kazakhstan.
Historically, India and Turkey have been, along with China, the most significant purchasers of Russian oil.
Additional supply disturbances are affecting Russian oil on top of the US sanctions.
A major source of Russian oil product exports, a Black Sea oil port, was severely damaged over the weekend by a Ukrainian drone attack.
Operations at a refinery situated near the port were temporarily halted because its storage facilities were full and its loading capacities were damaged.
All eyes on November 30
OPEC is employing a clear and straightforward strategy: maintaining current discipline to ensure future flexibility, with no abrupt changes anticipated before November 30, according to Rystad Energy’s Leon.
This approach will likely be challenged by the upcoming OPEC+ Ministerial meeting, which will test the group’s internal unity.
The member countries’ quotas are expected to be discussed, assessed, and ultimately re-established by the group.
Efforts to discuss specific country quotas have historically led to internal tensions, as each nation is motivated to argue for a larger allocation.
Angola’s departure from OPEC in December 2023 followed a dispute over its production capacity, which arose during the group’s discussion of individual quotas.
Disputing its assigned OPEC quota, Ecuador also withdrew from the organisation in late 2019.
Even if the OPEC+8 group halts its planned production increases during the first quarter of 2026, the revised liquids balance projection indicates the market will still face a substantial surplus, estimated at approximately 3.5 million barrels per day, Rystad’s estimates showed.
“Such a buildup would significantly loosen market fundamentals, placing renewed downward pressure on prices – unless the gains are offset by stronger demand growth, through stockpiling or unexpected supply disruptions elsewhere,” Rystad Energy said.
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