OPEC+ Faces Challenges in Boosting Oil Production

Investing.com — OPEC and its allies, or OPEC+, are facing an unfavorable backdrop for their plans to boost production as a potential crude surplus in 2025 and cooling demand will likely continue to blunt any increase in oil prices from potential supply disruptions, strategists from BofA indicated in a Monday note.

Production Plans and Demand Slowdown

OPEC+ has sought opportunities to raise output ever since ceding market share in late 2022. The group unveiled an aspirational plan in June to increase output, but a slowdown in demand growth from 1.9 million b/d in 2023 to just 900,000 b/d in 1Q24 and under 700,000 b/d in 2Q/3Q has disrupted those plans, according to BofA.

Non-OPEC Production Increases

Rising non-OPEC production has introduced a wave of new barrels to the market — a trend expected to persist as higher oil prices encourage more drilling. BofA noted that higher oil prices should lead to robust non-OPEC supply growth of 1.4 million b/d year-over-year in 2025, with an additional 900,000 b/d in 2026.

In 2025, countries like Brazil, Guyana, Canada, and Norway should add supplies of 300,000 b/d, 120,000 b/d, 90,000 b/d, and 90,000 b/d respectively. Meanwhile, U.S. supply is projected to rise more than 600,000 b/d next year, slowing growth from L-48 while Gulf of Mexico output rises again.

Global Oil Balance

The global oil balance is expected to shift towards a surplus of 730,000 b/d in 2025, limiting OPEC+’s options to manage market balances effectively. The group may need to maintain resolve and consider additional curtailments if market balances deteriorate further.

Geopolitical Factors and Pricing

Meanwhile, geopolitical tensions between Iran and Israel have provided a fleeting boost to oil prices, although there have been no supply disruptions to date. This scenario, combined with weak refining margins indicating soft oil demand, has kept Brent crude prices around $74 per barrel, a level BofA deems fair given the current uncertainties.