OPEC+ confronts the next stage in battle for oil market share

After stunning the oil world with a slew of production increases, OPEC+ is preparing to decide its next move at a key meeting on Sunday.

Saudi Arabia and its partners have yet to decide how to proceed after completing the fast-tracked addition of 2.5 million barrels a day that was finalised at its previous gathering, several delegates said on Wednesday. Bloomberg reported at the time that the group would consider all options going forward including increasing further or maintaining current levels, and that remains the case, according to one of the delegates.

The Organisation of the Petroleum Exporting Countries and its allies shocked the oil market in April with the accelerated revival of a large tranche of halted supply - abandoning years of effort to shore up prices. People familiar with the matter have since said that Saudi Arabia’s main objective is to recoup the market share OPEC+ has ceded to rivals like US shale drillers during years of output cutbacks.

The decision has come at a cost: Crude prices are down 9% since their pivot, trading near $68 a barrel in London on Wednesday, which has put pressure on revenues for producing countries. Riyadh is on course for record issuance to staunch its budget deficit, and is scaling back flagship projects.

The barrels OPEC+ has already green-lit come at a time of faltering consumption in China and swelling production across the Americas, threatening to unleash a glut later in the year.

Yet the market selloff has been surprisingly muted given the scale of the increases. OPEC+ has been able to restore an entire tranche of idled supplies in a year when most oil analysts doubted the group would be able to add any. Asian demand outside China has held up, and Beijing itself has stored away bargain-price barrels into storage tanks.

“If you are going to go for market share, it is probably not the best time to do it from the market perspective and the surplus in the fourth quarter,” said Jorge Leon, an analyst at Rystad Energy  who previously worked at the OPEC secretariat. “But there is ample room for OPEC+ to regain market share and still keep prices above $60.”

Opening the taps also offers political benefits for Riyadh, playing into President Donald Trump’s exhortations for cheaper fuel costs as he seeks to deliver on campaign pledges and keep inflation under wraps. It could also alleviate any impact on global supplies as the US intensifies pressure on India to reduce purchases of Russian oil.

Reuters reported on Wednesday that the group will consider further raising production at Sunday’s meeting. Oil prices extended losses on the news.

The alliance’s technical experts have recently examined a range of scenarios, including the possibility of an increase, one of the delegates said.

Delegates have previously said that they could hold output steady for a while, consider reviving another layer of halted supply, or even reverse the recent hikes. The next tranche of cuts amounts to 1.66 million barrels and is scheduled to remain offline until the end of 2026.

The market has broadly expected the alliance would hold steady for now: Seventeen traders surveyed by Bloomberg this week expected that OPEC+ would keep production levels flat in October, while six predicted a modest increase.

BLOOMBERG