OPEC "Modest" Output Hike Causes Relief, Worry, In Equal Measure

Analysts fear a calamitous glut is coming anyway.

The weekend decision by the Organization of the Petroleum Exporting Countries (OPEC) to enact a modest output hike caused what some analysts called a "relief rally" in oil trading on Monday – although bearish sentiment still dominates the market.

Brent settled up 94 cents at $65.47 per barrel, while West Texas Intermediate settled up 81 cents at $61.69 per barrel.

The previous week's trading was heavily influenced by rumours from people with knowledge of the matter that OPEC would hike output by as much as 548,000 barrels per day (bpd) over the next three months in order to regain market share; on Sunday the cartel decided on a 137,000 bpd hike as originally planned.
 
Giovanni Staunovo, analyst at UBS, stated in a note that focus will soon turn to declining spare capacity and expects only 60,000-70,000 bpd of actual production, due to some members having to compensate for previous overproduction and others facing capacity limitations.

"With every monthly addition, market participants will likely start to realize that some group members are maxed out," Staunovo wrote.

Still, Chris Weston, head of research at Pepperstone Group, said of the circumstances that caused Monday's relief rally that the OPEC increase "will do no favours to the notion of an oversupplied market in 2026, and as such the upside in this rally should be capped."

Meanwhile, Zain Vawda, analyst at MarketPulse, observed that the longer-term outlook "remains shadowed by significant structural bearishness….market sentiment continues to be fundamentally weighed down by ongoing concerns about oversupply projected into 2026."

Compounding Monday's gloom was Bloomberg analyst Javier Blas, who in a column for EnergyNow warned that the most dangerous element of the supposed coming oversupply is not the scale of production but financing rates above 6 percent, meaning the cost of carrying inventories for traders who previously used cheap credit to hold crude in storage and profit from contango could see their margins erased entirely.

Blas argued that this may cripple smaller refiners and traders reliant on short-term loans, leaving state-backed producers such as Saudi Aramco and Petrobras more capable of weathering prolonged weakness.