OPEC+ blinks as oil oversupply pressures grow

OPEC+ is bracing for an oil oversupply. That should scare every Canadian energy insider

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OPEC+ is backing off oil production hikes as global oversupply fears grow.

The group’s decision to pause increases after December reflects mounting pressure on crude markets—pressure that Canada’s energy sector can’t afford to ignore. With 2026 shaping up to be a year of major oversupply, the decisions made now could reshape oil prices—and economies—for years.

Despite insisting for months that no glut was around the corner, the Organization of the Petroleum Exporting Countries and its allies, known as OPEC+, which includes major producers such as Saudi Arabia and Russia, have reversed course.

At its online meeting last Sunday, OPEC+ agreed to increase its oil output for December by 137,000 barrels per day (bpd), a standard measure of oil production volume. It was the same increase chosen for October and November. Then came the more telling move: a pause on any further output hikes for the first quarter of 2026.

For Canada, where oil is a top export and a key economic driver, international supply gluts can sharply impact prices, investment and government revenues.

The OPEC+ decision caps a dramatic stretch in oil markets, rattled by growing concerns about a global crude surplus and uncertainty over new sanctions on major Russian producers. The United States recently sanctioned two of Russia’s largest energy companies, Rosneft and Lukoil, which together export an estimated three million bpd of crude oil, according to Goldman Sachs. How much of that will actually come off the market is still unclear.

Markets are watching closely. The modest December increase suggests OPEC+ doesn’t expect large volumes of Russian oil to disappear from circulation—at least not in the short term. ING analysts, quoted by Irina Slav of Oilprice.com, noted that “the price action suggests the market is not convinced we will lose a significant amount of Russian oil supply.” A recent meeting between U.S. President Donald Trump and Chinese President Xi Jinping only reinforced that belief, as Russian oil flows to China were reportedly not addressed in their talks.

Seasonal factors are also at play. The first quarter of the year is typically the weakest for oil demand, as many refineries undergo planned maintenance shutdowns. Still, OPEC+ would not have paused production hikes unless longer-term trends were also flashing warnings.

Those warnings are growing louder. The World Bank Group forecasts that excess global oil supply could average four million bpd by 2026. That kind of surplus has consequences. U.S. benchmark West Texas oil prices “could fall as low as the mid-US$30s within a year if the sizable physical market surplus expected in 2026 becomes reality,” said Tyler Richey, co-editor at Sevens Report Research.

Shell CEO Wael Sawan has also pointed to a credible oversupply scenario developing in the coming year. Meanwhile, global inventories are swelling. A record 10-week-long run-up has left nearly 1.4 billion barrels of oil sitting on tankers at sea. Even as China builds more storage, it has limited room to absorb the excess.

Market sentiment remains cautious. A Reuters poll of 36 economists and analysts in October showed few major forecast changes. Brent crude is projected to average US$67.99 per barrel in 2025, slightly above last month’s estimate. West Texas Intermediate is expected to average US$64.83, just marginally higher than earlier predictions. That stability in outlook, despite geopolitical drama and sanctions, reflects the underlying bearishness in supply-demand fundamentals.

Although prices have recovered somewhat, they hit a five-month low on Oct. 20—driven not only by oversupply fears, but by broader worries about U.S.-China trade tensions and slowing global growth.

The Canadian oil industry cannot afford to ignore these signals. Global oversupply, soft demand growth and trade uncertainty are reshaping the price environment. Canadian producers, already contending with unresolved tariff issues with the U.S., must factor in the risk of weaker returns ahead.

OPEC+ has read the room. Canada, now the world’s third-largest crude producer thanks to oil sands development, must do the same.

Toronto-based Rashid Husain Syed is a highly regarded analyst specializing in energy and politics, particularly in the Middle East. In addition to his contributions to local and international newspapers, Rashid frequently lends his expertise as a speaker at global conferences. Organizations such as the Department of Energy in Washington and the International Energy Agency in Paris have sought his insights on global energy matters.