“The oil market currently caught between two powerful forces: geopolitical instability and the gradual unwinding of OPEC+ production cuts,” said Claudio Galimberti. Chief Economist at Rystad Energy. “These factors are in a delicate balance, offsetting each other for now.”
Oil Price Forecast Remains Stable Despite Supply Glut and Geopolitical Tensions
In Europe’s evening trading, Brent dropped to $66 a barrel, while WTI stayed above $62. Despite the minor fluctuations. Oil prices are set to end the month with a loss of over 1.5%. Driven by expectations of increasing production from OPEC+ in the coming months.
OPEC+ scheduled to meet on Sunday to discuss its production strategy for November. Most analysts anticipate an agreement to increase output by 137,000 barrels per day. Earlier in the month, OPEC+ began rolling back production cuts. Which had previously limited output by 1.65 million barrels per day through next year. Analysts at Goldman Sachs suggested that a larger monthly increase might be on the cards for November. As demand in Asia remains strong and inventory levels in the OECD are slightly lower than last year.
However, the spare capacity within OPEC+ is rapidly dwindling. According to DNB Carnegie, “We expect only 50% of the 1.65 million barrels-per-day increase to translate into actual production, owing to the combination of limited capacity and the current overproduction within the OPEC+ alliance.”
OPEC+ Production Cuts and Geopolitics Play Tug-of-War in the Oil Market
Another factor compounding concerns of oversupply the resumption of oil exports from Iraq’s Kurdistan region to Turkey, which is expected to further add to the glut of barrels through to 2026. Meanwhile, geopolitical factors, such as President Trump’s peace plan for Gaza, could potentially reduce the oil market’s risk premium.
Despite these developments, volatility in the region remains high. Rystad’s Jorge Leon warns, “The geopolitical risk premium is firmly anchored in the oil market. With the possibility of setbacks or escalations in the Middle East, upside risks to oil prices are still in play.”
Volatility in the Middle East Could Push Oil Prices Higher Despite Supply Glut
At the same time, disruptions to Russian oil supply remain a significant concern. Ukrainian strikes on Russian energy infrastructure, coupled with growing tensions between Moscow and NATO, continue to pose a threat to the global oil supply. Additionally, President Trump’s push for the European Union to halt Russian oil purchases is adding to the uncertainty.
Meanwhile, sanctions against Iran have been reimposed following Tehran’s breach of the 2015 nuclear deal. However, analysts do not anticipate these sanctions to significantly impact Iranian oil production in the short term.
Looking further ahead, the Wall Street Journal survey indicates that Brent and WTI could drop to $61.77 and $58.74, respectively, in the first quarter of 2026, slightly lower than previous forecasts. However, analysts predict a potential rebound in the latter part of the year, with prices averaging $63.07 and $61.83 in the fourth quarter.
“Two key factors could influence the market in the coming months: the Federal Reserve’s monetary policy and China’s economic outlook,” Galimberti notes. “A more aggressive move from the Fed could ripple through the global economy, slightly boosting demand, while progress in trade talks with China could provide a much-needed upside for oil prices.”
As the year progresses, the tension between supply concerns and geopolitical risks continues to create an unpredictable environment for oil prices, with the market bracing for a potential rollercoaster ride in the months ahead.