This article first appeared on GuruFocus.
OPEC is taking a cautious step forward. The oil alliance agreed to a modest 137,000 barrels per day production increase for November the smallest on the table as members grow wary of flooding the market amid signs of slowing global demand, Reuters reported, citing insiders.
The group’s decision reflects growing concern about a potential glut as rival producers like the U.S., Brazil, and Guyana ramp up supply. Brent crude prices dropped nearly 8% to under $65 a barrel after reports hinted at a larger hike, extending a slide that’s kept prices between $60 and $70 since April well below the $82 seen at the start of the year.
Analysts say Saudi Arabia seems intent on reclaiming market share, with OPEC+ collectively adding over 2.7 million barrels a day since April, about 2.5% of global demand. But so far, only about three-quarters of that planned increase has actually reached the market, limited by production constraints. Much of the added supply has gone into Chinese storage tanks and seasonal fuel use.
With summer driving and harvest demand fading, inventories are piling up fast. J.P. Morgan estimates global oil and product stockpiles rose 123 million barrels in September, with China accounting for over a third of the build.
Looking ahead, the balance could still shift if new sanctions hit Russia or if China’s buying habits change. But for now, OPEC+ seems content to play defense choosing discipline over another price drop.