The OPEC+ countries agreed last week to postpone production increases until April next year, thereby extending the entire alliance's reduction plan.

However, the bank of america stated that efforts to boost oil prices are unlikely to succeed. Instead, limiting supply means OPEC+ is handing over market share to non-OPEC oil-producing countries, including the usa.

An analyst team from the bank of america wrote last Friday, "We expect that by 2030, the supply growth from non-OPEC countries will account for about 75% of global demand growth. In other words, only about 20% of OPEC+'s idle capacity needs to be activated in the 2020s."

Led by Saudi Arabia, OPEC+ has voluntarily reduced oil production since mid-2023 to boost oil prices. However, these efforts have had little effect, and the international benchmark Brent crude oil has decreased by more than 12% from its peak in April. The alliance has postponed production increases three times this year.

The bank of america noted that the lag in oil demand is the main culprit. This "Achilles' heel" is unlikely to improve next year, as it is estimated that by 2025, global oil demand growth will fall to below 1 million barrels per day. The slowdown in the world economy is the main reason.

Meanwhile, non-OPEC countries have become a thorn in the alliance's side. Us producers have been tapping record oil production, with monthly production in 2024 expected to hit a historic high.

The bank of america stated, "Although we expect OPEC's supply to grow by 0.3 million barrels per day next year, most of the growth in global oil supply will come from non-OPEC producers."

The bank added: “Overall, we predict that the supply from non-OPEC oil-producing countries will increase by 1.4 million barrels per day in 2025, and by 0.8 million barrels per day in 2026, with this growth being led by the usa and supported by other countries in the americas such as Brazil, Guyana, Argentina, and Canada.”

The bank of america stated that the sources posing a greater challenge to OPEC+ come from internal issues. Although the alliance has committed to reducing oil production, not all member countries adhere to this policy. Due to low oil prices leading to rising budget deficits in OPEC economies, some economies are exceeding their agreed quotas.

The analyst said: “Perhaps part of the reason is that compliance with OPEC quotas in 2024 has already been affected. Despite a decline in total output since summer, the surplus output so far still exceeds 0.5 million barrels per day.”

However, market share may also be significant for some OPEC countries. In October, increasing rumors suggested that OPEC leading country Saudi Arabia plans to release a wave of oil supply, partly to regain control over prices and ensure its dominant position in oil trading.

Editor/Lambor