OPEC+ is losing its ability to control oil prices due to weak global demand and rising non-OPEC oil supplies. Now, after the change in administration in the US, the control of OPEC+ on oil prices seems to be at its lowest level, stated a report by Kotak Institutional Equities (KIE). “We cut our oil price assumption to $70/bbl for FY2026-27 and LT ($80/bbl earlier). Lower oil prices are negative for upstream,” it said.
With retail prices frozen, KIE said, the lower oil prices are optically positive for OMCs. However, some of this positive impact will be offset by rising US oil supplies, declining Russian crude and a weak INR.
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US calling shots now
Since October 2022 when the OPEC+ alliance announced a 2.0 mb/d voluntary production cut, it has been keen to control oil prices by limiting supplies. With initial cuts insufficient, a few members took more voluntary cuts, and later delayed the reversal of these cuts. Despite this, oil prices weakened by late 2024. As the then Biden administration in the US increased sanctions on Russia, prices had briefly spiked in January 2025. However, with the new US administration going aggressive on tariffs, oil prices have sharply declined to 3-year lows. “With the initiative seemingly with the US, the effectiveness of OPEC+ alliance now seems at its lowest level. With the alliance keen to reverse the voluntary cuts, it now seems keener to get the market share back. The oil prices outlook remains weak,” the KIE report said.
Rising non-OPEC+ supplies led by US
The OPEC+ alliance’s efforts have been made difficult by rising supplies from countries that are not part of the OPEC+ alliance, mainly led by shale oil production in the US. “We note that crude oil production by the US has increased by ~1.5 mb/day since October 2022 levels. This has happened despite overall shale rig deployment declining by nearly 25 per cent. Driven by the US, OECD Americas (also includes Canada, Mexico and Chile) grew oil production by nearly 1.6 mb/d in 2023, and accounted for over 50 per cent of non-OPEC+ production rise of 2.7 mb/d,” Kotak said.
Driven by further increases in the US oil production by 0.6-0.7 mb/d,
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