Oil markets opened the week with steady gains as Opec and its allies opted to pause production increases during the first quarter of 2026, signalling a careful recalibration of supply in response to seasonal demand weakness and continuing geopolitical uncertainty.
Brent crude futures fell 81 cents, or 1.25 per cent, to $64.08 a barrel by 1310 GMT. US West Texas Intermediate crude was down 84 cents, or 1.38 per cent, at $60.21.
The decision, announced following a virtual Opec+ ministerial meeting, confirmed that the coalition will proceed with a modest supply increase of 137,000 barrels per day (bpd) in December 2025, consistent with the incremental additions rolled out in October and November.
However, further increases scheduled for January to March 2026 have been suspended. The group emphasised that the pause was designed to manage expected seasonal dips in consumption during the first quarter while preserving flexibility to act should market conditions shift sharply.
The move underscores Opec’s broader strategy of balancing price support against the need to maintain market share in the face of rising non-Opec supply.
Morgan Stanley, in a recent commodities outlook, noted that although physical markets remain adequately supplied, demand growth is softening, particularly in Asia, which has led the recovery in recent years. The bank expects Brent to trade in a range of $65 to $75 per barrel over the coming months, provided the group maintains discipline.
The International Energy Agency forecasts that global oil supply will increase by about 3 million bpd in 2025 to reach 106.1 million bpd, driven largely by the US, Brazil, Guyana and Canada. In 2026, supply is projected to rise by a further 2.4 million bpd to 108.5 million bpd. By contrast, demand growth is expected to slow to roughly 710,000 bpd in 2025 and 700,000 bpd in 2026, raising concerns of oversupply unless producer restraint endures.
Since April 2025, Opec+ has collectively restored around 2.9 million bpd of production, accounting for nearly 2.7 per cent of global supply. But the group has been careful to scale these additions gradually, aware that an aggressive return of barrels could depress prices. Saudi Arabia, the effective leader of the group, has repeatedly stressed the importance of “pre-emptive and precautionary” policymaking to ensure market stability.
Geopolitical risks are also feeding into the group’s cautious posture. Western sanctions against Russian oil companies such as Rosneft and Lukoil have disrupted export flows, while drone attacks on Russia’s refining network have reportedly knocked out an estimated 500,000 bpd of processing capacity.
These disruptions add an element of unpredictability to first-quarter supply projections, with analysts warning that further escalation could tighten markets unexpectedly.
At the same time, the US continues to produce near-record levels of crude, supported by productivity gains in the Permian Basin. The US Energy Information Administration expects US output to average around 13.3 million bpd in 2026, up from an estimated 13.1 million bpd this year.
Meanwhile, Brazil and Guyana are set to be the fastest-growing sources of new supply outside Opec+ as deepwater project schedules remain on track.
Oil prices have seen bouts of volatility this year, reflecting the interplay of supply uncertainty, fluctuating demand expectations, and shifting investor sentiment.
Brent has eased about 0.70 per cent over the past month to around $65 per barrel, mirroring a trend of range-bound trading as markets assess whether the global economy can maintain momentum amid higher borrowing costs and uneven industrial activity.
The latest decision suggests that Opec is choosing to stabilise rather than stimulate. By pausing production hikes during a seasonally weak quarter, the group reduces the risk of swelling inventories and steep price declines. While the policy does not guarantee a sustained price rally, it limits the downside at a time when traders have been sensitive to signs of oversupply.
Analysts say the next inflection point for prices will depend on demand recovery in Asia, the trajectory of US interest rates, and the extent of Russian supply disruptions. “For now, Opec has signalled it will move cautiously, ready to adjust output either way — a stance designed to keep the market balanced and prices broadly supported as 2026 begins.”
