Cairo: Hani Kamal El-Din
Relaxing control over oil production could cause a significant drop in crude oil prices
Russian Deputy Prime Minister Alexander Novak, in a conversation with Saudi Arabian Minister of Energy Prince Abdulaziz bin Salman Al Saud and Iraqi Minister of Energy Ziyad Ali Fadhil, emphasized the importance of adhering to production quotas.
Next Sunday, a meeting will be held among the energy ministers of OPEC+ member countries to discuss new production limits for 2025. The most likely outcome is a decision to delay the planned increase in oil production, which was set to begin in January. The recovery of oil production may be postponed for several months. If OPEC+ eases production restrictions, prices are expected to drop, especially with a slowdown in the global economy, analysts warn. The leaderships of Saudi Arabia, Russia, Iraq, and Kazakhstan are actively discussing the discipline required to maintain the set production volumes.
On Wednesday, Brent crude was trading at $72 per barrel. In general, oil prices have largely remained in the $70–80 per barrel range this year. However, a downward trend in oil prices has recently been observed. On Tuesday, oil was trading below $74 per barrel. As a result, OPEC+ countries are trying to reach an agreement to support prices above the $70 per barrel mark for Brent oil.
On Wednesday, Alexander Novak discussed the oil market situation and cooperation within OPEC+ with Saudi Energy Minister Abdulaziz bin Salman Al Saud and Kazakhstan’s Minister of Energy Almasadam Satkaliyev. “The meeting participants emphasized the importance of maintaining stability and balance in the global oil market, noting the significance of the OPEC+ group. They also underlined the importance of coordination among OPEC+ members and their full commitment to the agreement, including voluntary production cuts and compensation for overproduction,” an official statement said.
Earlier, Alexander Novak visited Baghdad, where he held a trilateral meeting with Saudi Energy Minister Prince Abdulaziz bin Salman Al Saud and Iraq’s Deputy Oil Minister Ali Maaridj. The Russian government website specified that the participants “highlighted the importance of maintaining stability and balance in global oil markets and the crucial role of the OPEC+ group in this regard.” They also emphasized the importance of cooperation between OPEC+ countries and their full commitment to the agreement, including voluntary production cuts and compensation for overproduction.
Iraq, according to Russian sources, confirmed its full commitment to the agreement, voluntary production cuts, and compensation for increased production according to the updated schedule presented to the OPEC Secretariat. Iraq’s prime minister’s office stated that the parties discussed “conditions in the global energy markets and issues related to crude oil production, its supply to the markets, and meeting demand.” Saudi Arabia’s Ministry of Energy also stated that the countries emphasized the importance of full adherence to the OPEC+ oil supply agreement, including voluntary production cuts agreed upon by eight member states and measures to compensate for any increase in production.
“Stability in the global oil markets” has been a key topic of discussion over the past few weeks. Last week, Russian President Vladimir Putin met with Iraqi Prime Minister Mohammed Sudani. According to the Kremlin’s press service, the two sides discussed various aspects of their cooperation within OPEC+ and confirmed the importance of further coordinating actions within this framework. Earlier, “continued coordination” within OPEC+ was also discussed with Saudi Arabia’s Crown Prince Mohammed bin Salman Al Saud.
Interfax, citing Western media, reports the start of discussions on a possible postponement of the planned oil production increase, initially scheduled for January. OPEC+ sources indicated that the increase might be delayed until the first quarter of the year. Commerzbank analysts also expect the increase to be postponed until at least the end of the first quarter. Azerbaijan’s Energy Minister Parviz Shahbazov stated on Monday that the OPEC+ meeting on Sunday might discuss the possibility of maintaining current production cuts starting January 1.
It should be noted that since the first quarter of 2024, eight OPEC+ countries, including Russia and Saudi Arabia, have been voluntarily cutting production by 2.2 million barrels per day (bpd). In October 2024, these countries had planned to gradually begin restoring production, but the increase was postponed until the end of 2024. Meanwhile, three other countries—Russia, Iraq, and Kazakhstan—are required to gradually compensate for their non-compliance with the production cuts by September of the following year.
According to the International Energy Agency (IEA), the global oil market could face oversupply next year, even if OPEC+ completely cancels its planned production increases. However, not all members of the agreement are considering extending the restrictions. Iranian Oil Minister Mohsen Paknejad stated this week that Iran would oppose any new restrictions on oil production at the OPEC+ meeting and will strive to maintain its market share. He added that Tehran is not currently concerned about the sale and export of oil, as measures have been implemented to continue trading under “any conditions.” Iran’s representative in OPEC+, Afshin Djavan, said that the strategy to support prices has, in fact, led to increased supplies beyond the group, particularly from the U.S.
The phrase “any conditions” likely refers to the potential tightening of sanctions on Tehran by the Trump administration, including attempts to completely halt Iranian oil exports. Analysts believe that the newly elected U.S. president may impose restrictions that could remove 1 million barrels per day from the market.
Rapidan Energy believes that the oil market is underestimating the possibility of increased sanctions against Russia and Iran. According to Rapidan Energy’s calculations, this would lead to a 500,000 bpd reduction in Iranian oil supplies. The loss of 1 to 1.2 million bpd would eliminate the threat of an oversupply.
Kazakhstan poses another challenge for the cartel. The country will find it more difficult to comply with OPEC’s quotas once production at the Tengiz field reaches full capacity, experts suggest. Next year, Kazakhstan will be able to produce 2 million bpd. The country is already producing above its quota. In October 2024, Kazakhstan produced 1.22 million bpd, according to Platts data. Kazakhstan’s OPEC+ quota for October was 1.203 million bpd, meaning it exceeded its quota by 17,000 bpd.
Astana has promised to compensate for accumulated overproduction within the OPEC+ agreement by September 2025.
Experts believe that a new OPEC+ delay in increasing production will be a blow to Kazakhstan, and the country may ignore the restrictions imposed by OPEC+, joining the UAE and Iraq, which are also producing significantly above their quotas.
The prospects of extending production restrictions within OPEC+ appear realistic, experts say. “Saudi Arabia and Russia, as key members of the alliance, have the economic incentive to keep oil prices high, and their active negotiations, including meetings with Iraq, confirm their commitment to coordination,” said Kirill Klimentyev, an analyst at “Zifra Broker.”
In his view, next year’s oil price dynamics will depend on several factors: global demand, economic growth, possible increases in U.S. shale oil production, and the development of geopolitical conflicts. “If current restrictions are extended and stable demand is maintained, prices could remain in the $70–80 per barrel range. However, if OPEC+ eases production control, a downward correction is possible, especially with a slowdown in the global economy,” the analyst added.
BCS “World Investments” stock market expert Lyudmila Rokotyanskaya believes that support for oil prices is currently being provided by numerous reports that OPEC+ intends to delay its production increase plans. “An additional positive factor will be the extension of these plans not for a month, but for one or two quarters,” she adds.
According to Finam analyst Nikolai Dudchenko, releasing additional volumes into the market at current oil prices would be illogical for the cartel. “Next year, OPEC+’s main focus will also be the price on the market. Currently, the main risk is possible actions by the new U.S. administration to increase production,” he said.
Dudchenko does not rule out internal disagreements within the oil cartel. “Problems may arise with Kazakhstan because the country is investing heavily in expanding production capacity and may exceed 2 million bpd next year. Participation in OPEC+ is becoming a limiting factor,” said the analyst, predicting that the average price for Brent crude next year will be in the range of $76–77 per barrel.
