Prospects of oversupply overshadow geopolitical risks. OPEC+ expected to reiterate suspension of production increases in the first quarter of next year.

According to three sources, in the context of increasing signs of global oil oversupply, OPEC+ is expected to stick to its plan to pause production increases at its meeting this weekend. Key OPEC+ member countries, led by Saudi Arabia and Russia, will hold a monthly video conference on January 4 to review a decision made in November to pause further production increases in the first quarter of next year. At a meeting earlier this month, the alliance confirmed the plan to pause production increases in the first quarter of next year. With increasing oil supply from OPEC+ and its competitors, and global demand growth slowing down, oil prices have already fallen 17% this year, on track to record the largest annual drop since 2020. Forecasting agencies like the International Energy Agency (IEA) predict a record oil oversupply next year. In April this year, the eight major oil-producing countries in OPEC+ suddenly began accelerating the resumption of oil production that had been paused since 2023, shocking the market. Officials said this move was to regain market share from competitors like U.S. shale oil producers and punish OPEC+ member countries that ignored production quotas. However, expectations of oversupply leading to prolonged low oil prices prompted OPEC+ to decide in November to pause production increases in the first quarter of next year after increasing production by 137,000 barrels per day in December. OPEC+'s meeting this weekend comes amid heightened geopolitical uncertainty in the global oil market. Pressured by the Trump administration's sanctions, Venezuela's state-owned refineries are facing storage space depletion and continuous inventory buildup issues. The country's national oil company, PDVSA, began shutting down some oil wells domestically on December 28. Russia's oil infrastructure and tankers have been targets of attacks by Ukraine, with an attack in late November causing damage to a key export terminal of the Caspian Pipeline Consortium (CPC) in the Black Sea region, blocking most of Kazakhstan's oil exports. Both Venezuela and Kazakhstan are OPEC+ member countries. Additionally, amid escalating political tensions in Yemen, rare public tensions have arisen between the leading OPEC+ members, Saudi Arabia and the UAE. It's worth mentioning that Wall Street generally holds a pessimistic view on global oil demand prospects for 2026, expecting significant oversupply next year. According to forecasts from major banks like Bank of America, Citigroup, Goldman Sachs, JPMorgan, and Morgan Stanley, the current trading price of Brent crude oil futures approaching $62 per barrel is expected to further decline to around $59 per barrel in 2026. In a report released earlier this month, OPEC maintained its forecast for relatively strong growth in oil demand next year. The report stated that the alliance does not anticipate an expectation of "oversupply" in the market supply-demand outlook, insisting that the market is "fundamentally balanced" with steadily growing demand. OPEC predicts that in the first quarter of 2026, global market demand for OPEC+ oil will average 42.6 million barrels per day, and estimates the average demand for the whole of 2026 to be around 43 million barrels per day. OPEC also maintains its forecast for global oil demand growth in 2025 and 2026, stating that the world economy is still on a steady path of oil demand growth.