OPEC+ agreed to pause its plans to continuously increase production in 2026, as its monthslong production hikes had stoked fear among global and U.S. producers that increased supply would push the market to an oil glut and further depress prices.
Since April, OPEC+ has increased production by more than 2.5 million barrels per day, causing crude prices to toe and even fall below the $60 barrel line.
Many domestic oil and gas executives said this price level was one at which pursuing new drilling in the United States was no longer profitable, especially due to higher supply chain costs resulting from tariffs on products such as steel.
Some even warned that if increased supply continued to push prices into the $50s, it would cause crude supply in the U.S. to plateau.
The oil-producing bloc agreed on Sunday to slightly increase production again in December by 137,000 barrels per day. However, beyond next month, OPEC+ said it would pause these production increments in January, February, and March of next year.
While this move could be directly attributed to fears of a supply glut, OPEC+ said it was “due to seasonality.”
The decision to pause production hikes also signals that OPEC+ does not anticipate a major loss in Russian supply as a result of the latest sanctions imposed by the U.S.
Last month, the Trump administration introduced new sanctions on Russian energy majors Rosneft and Lukoil in its latest attempt to reduce the revenue Moscow has used to fuel its war in Ukraine. Days later, Lukoil agreed to sell its international assets to Swiss commodities trader Gunvor.
Jorge Leon, head of geopolitical analysis at Rystad Energy, told the Wall Street Journal that by pausing its production hikes, OPEC+ can help protect prices while giving investors more time to see how these sanctions will continue to affect Russian production.
Prices did not appear to be strongly affected by the news on Monday morning, with both international and domestic benchmarks dropping by less than 1%.
At around 10 a.m. EST, Brent Crude was down by 0.15%, selling at $64.67 per barrel. West Texas Intermediate also fell by 0.20% and was priced at $60.86 per barrel.
This steadiness comes just weeks after U.S. crude prices hit their lowest level seen in nearly five years.
In mid-October, domestic oil futures were trading at less than $57 per barrel, the lowest level seen since February 2021.
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While the lower prices are a win for American consumers, drillers and producers have warned that the market conditions will make it more difficult for them to pursue new projects and support the Trump administration’s “drill, baby, drill” agenda.
Last month, ConocoPhillips CEO Ryan Lance warned that if prices stayed at $60 or trended further into the $50s, domestic drillers would likely see supply plateau or slightly decline.
