Production capacity "truth" becomes the focus! OPEC+ to discuss long-term quotas this weekend, signs of global oil supply glut increasing.

OPEC+ oil-producing countries will gather again this weekend and once again face a tricky task of determining how much crude oil each member country can actually produce. In May, the Organization of the Petroleum Exporting Countries and its allies (OPEC+) launched a new assessment of members' "maximum sustainable production capacity" to provide a basis for setting production quotas for 2027. As the production levels for the coming months are already determined, representatives have indicated that this longer-term assessment is likely to be a focus of the meeting this Sunday. As some member countries have struggled to increase production according to the agreement this year, the need to assess production capacity has increased. This phenomenon indicates that some countries may already be approaching their production limits. Clarifying each country's actual production capacity will help make quotas more realistic and increase credibility for future production cuts if necessary. This assessment work may face a serious challenge in 2026. Signs of global crude oil oversupply are increasing, and oil prices have recently fallen to around $60 per barrel in London, facing downward pressure. In a report on Monday, JPMorgan warned that OPEC+ may need to implement new production cuts next year to prevent oil prices from falling to the $40 range. However, the production capacity assessment may also cause internal friction. Some member countries are seeking to increase the valuation of their production capacity, while others are reluctant to admit that their actual production capacity is less than officially claimed. Last year, disagreements over this issue even led long-time member Angola to withdraw from OPEC. While the group's leading country Saudi Arabia still has the ability to significantly increase production, the prospects for other member countries are much more complex. The United Arab Emirates and Iraq are actively seeking to expand production capacity, while Russia is still constrained by Western sanctions. In the evaluation process, OPEC+ will work with several energy consulting firms, including Wood Mackenzie, which has participated in the past, and IHS, which is now part of S&P Global. Some technical preparatory work has already begun at the September meeting. A representative stated that it is still unclear what OPEC+ will discuss at a series of online meetings this Sunday. Apart from reviewing the oil market situation, the meeting will also allow key members to examine production policies at the beginning of 2026. However, some representatives believe that this meeting is unlikely to announce any changes. It is worth noting that eight member countries of the organization decided this month to suspend further production increases in the first quarter of next year. Previously, these countries had significantly increased supply at an unexpected speed in the first half of this year, but as global supply surplus signs became more apparent, they chose to pause their actions to avoid exacerbating market pressures. RBC Capital Markets analysis believes that OPEC+ is unlikely to adjust its policies until geopolitical uncertainties become clearer. Global supply is currently being impacted by U.S. sanctions against Russia and the international community taking a tougher stance on Venezuela. Helima Croft, head of commodity strategy at RBC, said, "We still believe OPEC will maintain a strategy of watchful waiting until the situation becomes clearer."