Oil Traders Doubt OPEC+ Will Cut Supply in 2026 Despite Surplus
(Bloomberg) — Oil traders are not counting on OPEC+ to cut production next year, despite forecasts that a global supply surplus could send prices even lower.
Almost two-thirds of 25 brokers and analysts surveyed by Bloomberg News said that the Organization of the Petroleum Exporting Countries and its allies probably wouldn’t cut output next year. Less than a third anticipated the group would agree to reduce supplies, the first time in more than two years it would make such a move.
Most Read from Bloomberg
While many anticipate global oversupply next year, they said it would not necessarily be large enough to sink crude prices and provoke OPEC+ to reverse the production hikes that it has implemented this year.
Saudi Arabia and its partners stunned oil markets in April by deciding to rapidly revive halted production despite abundant supplies, in an apparent bid to reclaim market share. With signs of an emerging glut — which the International Energy Agency estimates will swell to a record in 2026 — producers have started showing more caution, agreeing this month to pause further output increases in the first quarter.
Oil futures are down 14% this year to near $64 a barrel in London, straining the finances of OPEC+ members, and some Wall Street forecasters anticipate further price losses. Morgan Stanley sees a “very substantial” chance OPEC+ will cut production in 2026 to avert a slump.
Nonetheless, only eight of 25 respondents in Bloomberg’s survey said they expect OPEC+ curbs next year. Twelve said they don’t anticipate any curbs, and several others said they’re unlikely barring an unexpected market rout.
“To reverse policy and commit to cuts is likely only if demand undergoes a visible collapse, prices fall past $50, and it becomes clear to OPEC’s leaders that a policy shift back to market management is necessary,” said Greg Brew, senior analyst at consultants Eurasia Group in New York.
Since the April decision to break with years of efforts aimed at supporting prices, eight key OPEC+ nations have revived — at least on paper — three-quarters of the 3.85 million barrels-a-day of production halted since 2023. The supplies are being returned roughly a year ahead of schedule.
People familiar with Saudi Arabia’s thinking have said the pivot toward opening the taps is intended to regain market share ceded in previous years to rivals like US shale drillers.
‘Something Must Give’
There could also be a political dimension. The Saudis are seeking a range of security provisions from Washington, and Crown Prince Mohammed bin Salman is due to meet this week with President Donald Trump, who has called on OPEC to lower fuel prices.
The coalition’s decision to pause further increases could be a prelude to agreeing new production cuts, according to consultants FGE and Rapidan Energy Group.
With oil demand growth still muted and supply from the US, Brazil and Guyana strong, the IEA projects global markets face a potential excess of 4 million barrels a day — unprecedented outside of the Covid pandemic in 2020.
Output curbs by OPEC+ appear the most likely bulwark to prevent such immense stockpile build-ups from materializing, the Paris-based adviser to major economies said. The producers have repeatedly stressed they may “pause or reverse” this year’s production increases.
“Either this looming projected surplus is the biggest mirage in recent oil market history, or something must give next year to prevent a sharp price drop,” said Bob McNally, president and founder of Rapidan and a former White House energy official. “If that’s not geopolitical disruptions, or sanctions on Iran or Russia, then it may need to be a hefty OPEC+ cut.”
Crude’s retreat has put a financial strain on many OPEC+ members including the Saudis, who face a widening budget deficit and have been forced to cut back investment in flagship economic projects.
Yet many forecasters, such as Goldman Sachs Group Inc. and HSBC Bank Plc, estimate that next year’s oversupply will be smaller than the IEA projects. Excess barrels may continue to be absorbed by China, which has been filling strategic reserves.
If OPEC+ can withstand oil market weakness early next year, it may be in a stronger position by late 2026. Supply growth from non-OPEC producers could stall as soon as early next year, BP Plc Chief Executive Officer Murray Auchincloss has said.
The alliance may then be able to declare its strategic shift toward pursuing market share a victory, especially as forecasters like the IEA and Goldman Sachs say that oil demand may continue to grow longer than previously expected.
“I don’t think OPEC+ will cut production in 2026,” said Jorge Leon, an analyst at consultant Rystad Energy AS who previously worked in the OPEC Secretariat. “OPEC+ has clearly set the direction of travel, which is to regain market share.”
Leave a Comment
Your email address will not be published. Required fields are marked *