OPEC+’s Oil Market Quick Fix Masks a Bigger Problem: Too Much Crude Next Year - Bloomberg

OPEC+’s Oil Market Quick Fix Masks a Bigger Problem: Too Much Crude Next Year - Bloomberg

OPEC+ has staved off an oil surplus this year by deciding to restrain production a little longer. But the temporary fix won’t hold back the supply glut awaiting global markets in 2025.

The group led by Saudi Arabia and Russia chose on Thursday to delay plans to restore output by two months, after faltering economic growth in China and swelling American supply pushed crude prices to a 14-month low.

By changing its road map for reviving supply, the group has probably averted the excess that had been otherwise expected by leading industry figures like Trafigura Group and the International Energy Agency. Crude’s rout briefly stabilized.

Yet even if OPEC+ continues to constrain production throughout 2025, a surplus will still emerge amid subdued demand growth and burgeoning output from the US, Guyana, Brazil and Canada, according to the IEA. Prices are set to slump toward $60 a barrel, Citigroup Inc. and JPMorgan Chase & Co. predict.

The market’s decline offers some relief to consumers and central banks after years of rampant inflation, and even a potential tailwind for Vice President Kamala Harris’s election campaign. But it leaves prices too low for the Saudis and others in the Organization of Petroleum Exporting Countries to cover government spending.

“It doesn’t look good at all for OPEC+ in 2025,” said Christof Ruehl, senior analyst at Columbia University’s Center on Global Energy Policy. “Everybody would agree that non-OPEC supply is strong enough to create a surplus in the market. And holding back supply now to keep prices up encourages that, of course.”