OPEC+ meets on Sunday to set its next production move amid heightened geopolitical friction affecting nearly a third of its output. That volatility may give the group cover to stick to its balanced-market narrative, even if the facts on the ground suggest otherwise.
The group, which comprises the Organisation of the Petroleum Exporting Countries and allies like Russia, appears poised to agree at its meeting on Sunday to crank up output by 137,000 barrels per day (bpd) in April, following a three-month pause prompted by seasonally weak demand.
Such an increase would signal confidence in the group’s projection that global oil supply and demand will remain broadly balanced throughout 2026, a view that stands in stark contrast to the International Energy Agency’s forecast of a hefty oversupply of 3.7 million bpd.
Yet, growing signs suggest the physical oil market is loosening, including elevated global production, rising inventories both onshore and offshore, and softer demand growth.
Indeed, the IEA this month trimmed its projection for global oil demand growth in 2026 to 850,000 bpd, down by around 80,000 bpd from its January forecast.
Even OPEC analysts recently forecast that demand for OPEC+ crude will fall by 400,000 bpd in the second quarter from the previous period, to 42.2 million bpd, due to higher output in other countries.
The group expects demand for its crude to rebound by 1.2 million bpd in the third quarter, in keeping with its contention that the market will remain in balance this year.
Signs of underlying weakness have not triggered a decline in crude prices, however, because they have been masked by rising geopolitical risk. Global benchmark Brent crude prices have risen above $70 a barrel in recent weeks, the highest level since August, as tensions have risen on multiple fronts.
Around one-third of OPEC+ production - some 13.5 million bpd - is now subject to heavy Western sanctions, exposed to a US military threat, or under Washington’s direct control, in the case of Venezuela. The biggest risk this market faces right now is obviously the standoff between the US and Iran.
American and Iranian officials will hold a third round of indirect talks in Geneva on Thursday in an effort to reach a deal over Tehran’s nuclear ambitions, though the gaps between the two sides appear wide.
Meanwhile, the US has amassed an enormous military presence in the Middle East, a region that exports nearly 20 million bpd of crude oil and refined products - roughly a fifth of global supply.
A prolonged military engagement here risks triggering severe disruption to oil and gas markets. At the same time, tightening Western sanctions on Russia, whose full-scale invasion of Ukraine entered its fifth year this week, are continuing to create severe distortions in energy markets.
For one, they are weighing on Russian production, which was around 350,000 bpd below the country’s OPEC+ quota of 9.57 million bpd in January, according to the IEA.
Russian producers are also struggling to place their crude as Indian refiners have sharply reduced purchases in line with the country’s interim trade deal with the US.
As a result, the volume of Russian crude held on tankers has hovered in recent weeks near a record high of around 155 million barrels, a major contributor to the rise in global inventories, according to data analytics firm Kpler. The sizeable accumulation in recent months of sanctioned oil from Russia, as well as Iran, has distorted the global balances and supported oil prices despite signs of weakening demand growth.
OPEC+ has typically sought to look through geopolitical turmoil, focusing on underlying supply and demand fundamentals instead. But this time around, it’s the headline noise that may enable the group to pursue its desired strategy.
The eight key OPEC+ producers — Saudi Arabia, Russia, the United Arab Emirates, Kazakhstan, Kuwait, Iraq, Algeria and Oman — raised production quotas by about 2.9 million bpd between April and December 2025, equivalent to roughly three per cent of global demand, even as the IEA was forecasting an increasingly large supply glut. The group then took a three-month pause.
Given the significant uncertainty hanging over the oil market, OPEC+ ministers would be forgiven for choosing not to increase output immediately and opting instead for a wait-and-see approach. But extending the pause risks undermining confidence in the group’s authority, as it has been clear that it believes higher production is warranted.
OPEC+ may therefore decide on a modest output increase – something small enough to avoid materially loosening global supplies, but sufficient to signal confidence in its market outlook.
If it weren’t for the elevated geopolitical tensions and lack of clarity about global supply, the producer group would have a harder time threading that needle.
(Ron Bousso Editing by Marguerita Choy)