Oil prices hit their longest consecutive increase in over a month! OPEC+ decides to suspend production increase in the first quarter of next year in response to weak demand and surplus risks.

After OPEC+ set the goal of expanding market share in balance with the increasingly apparent signals of oversupply, it has decided to temporarily suspend production increases in the first quarter of next year, but the alliance will still slightly increase production next month. Major member countries, led by Saudi Arabia, reached an agreement on Sunday during a video conference to increase production by 137,000 barrels per day in December, in line with the planned increases for October and November, and then to suspend production increases from January to March next year. The first quarter is usually a low season for oil demand, and representatives at the meeting stated that the decision to suspend production increases from January reflects expectations of a slowdown in seasonal demand. After the announcement, Brent crude oil prices broke through $65 per barrel on Monday, extending gains for the fourth consecutive day, marking the longest consecutive increase since late September; WTI crude oil prices exceeded $61 per barrel. However, as this decision was made, oil traders are facing a period of uncertainty. Russia, as a leading member of the OPEC+ alliance, is facing sanctions, which adds uncertainty to its oil supply prospects. At the same time, traders point out that the current oversupply situation is worsening, and it is expected to deteriorate further next year. Helima Croft, head of commodity strategy at the Royal Bank of Canada Capital Markets, said, "The suspension of production increases is undoubtedly a new variable in the situation, but considering the uncertainty of supply prospects in the first quarter, I believe it is a cautious move." Although the sanctions on Russia have provided support after oil prices fell to a five-month low, a representative revealed earlier in the day that OPEC+ is currently unable to assess the impact of these sanctions on the overall market. This will be the first time OPEC+ has suspended production increases since starting the rapid recovery of production cuts in April. Jorge Leon, an analyst at consulting firm Rystad Energy AS, said, "OPEC+ is adjusting its strategy, but this is a thoughtful response. The sanctions on Russian producers have added uncertainty to supply forecasts." The suspension of production increases at the beginning of next year means that the eight member countries of the alliance still have an established increase of approximately 1.2 million barrels per day to restore. Representatives at the meeting said this decision was widely supported. Brent crude oil futures prices have fallen by about 13% this year, closing below $65 per barrel last Friday. In addition to the Russian sanctions, the one-year tariff truce agreement reached between China and the United States last week also supported oil prices. Saudi Crown Prince Mohammed bin Salman is expected to go to Washington later this month to meet with US President Trump. Trump has repeatedly called on OPEC to help lower fuel prices. Production increases did not meet expectations Due to the need for some member countries to make up for the shortfall caused by previous overproduction and limited production capacity in some countries, the actual production increase by OPEC+ is far below the planned target, weakening its impact on the market. Although the entire industry has issued warnings of an oil price collapse, OPEC+ has repeatedly stated that this year's decision to resume production was based on "robust market fundamentals" and lower inventory levels. For most of this year, even though the organization restored a production quota of 2.2 million barrels per day a year early, oil prices remained resilient, which to some extent affirmed the reasonableness of its stance. However, more and more signs indicate that as demand from the world's largest oil-consuming countries cools and oil supply in the Americas surges, the global market is gradually falling into oversupply. Major trading companies such as Trafigura Group have stated that oversupply is already occurring and point out that crude oil inventories in the global tanker fleet are accumulating. The International Energy Agency (IEA) predicts that global oversupply this quarter may exceed 3 million barrels per day, and the oversupply next year could reach unprecedented levels. Both Morgan Stanley and Goldman Sachs predict that oil prices will further drop below $60 per barrel. The market downturn inevitably has an impact on US shale oil producers and other oil producers. Although the US remains the largest source of global oil supply growth this year, it is expected that by 2026, its supply growth will stall. Executives in the shale oil industry warned that with shrinking investments, the industry is approaching a "tipping point." Saudi Arabia's abandonment of efforts to support oil prices for many years has also had an impact on the country itself. In the third quarter of this year, Saudi's budget deficit further widened, forcing the country to cut spending on some economic transformation projects, including the NEOM new future city project. The 22 member countries of the OPEC+ alliance will hold a meeting on November 30 to discuss production levels for 2026.