"Modest" OPEC Hike Boosts Prices, Prompts Mixed Analytical Worries

Critics warn that OPEC is now solely interested in it own bottom line: File Image/Pixabay

Fears that the Organization of the Petroleum Exporting Countries (OPEC) would agree this weekend to aggressively unwind its output cuts proved unfounded, as the cartel opted instead for a modest hike – and as a result, oil prices settled slightly higher on Monday.

Brent settled up 52 cents to $66.02 per barrel, and West Texas Intermediate settled up 39 cents at $62.26 per barrel.

OPEC and its partners decided to add 137,000 barrels per day (bpd) next month, a smaller increment than they’d scheduled for the previous two months; it stated that restarting the remainder of the 1.66 million bpd of cuts would be contingent on “evolving market conditions” and also stressed that any increases could be reversed.

However, OPEC’s de facto leader, Saudi Arabia. also cut prices of its flagship grade for the Asian market in October, indicating it sees a decline in demand – which reportedly pared Monday’s gains.

Rebecca Babin, a senior energy trader at CIBC Private Wealth Group, said of Monday’s trading, “This looks like more of a relief rally — one that may stave off the bearish narrative briefly, but probably only for a day or two.”

At least one analyst was alarmed by OPEC’s output decision: Claudio Galimberti, chief economist at Rystad Energy, said that it "signaled a decisive pivot: defending market share now outweighs defending prices.

"The headline volume may look marginal, but the messaging is not allowing supply back into a market moving toward surplus, OPEC+ is playing offense, not defense….traders have been put on notice."

For their part, analysts at Societe Generale wrote that the expansion of output so far this year may have deterred "some upstream investment in non-OPEC+ countries, including the U.S. shale patch," while removing the "perceptions of plentiful spare [output] capacity that has kept a lid on upward moves in oil prices in recent years."

Meanwhile, Goldman Sachs revised its previous estimate of global excess supply in 2026 from 1.7 million bpd to 1.9 million bpd, due to higher U.S. output; the bank estimates global oil demand will grow next year by 900,000 bpd, mainly driven by Canada, Guyana and Brazil.