OPEC+ may have managed to stay united despite market speculation, but it does not have the ability to push oil prices much higher, according to Vandana Hari, founder of Vanda Insights and global energy market expert.
In an interview with CNBC, Hari discussed OPEC+’s strategy and the limits of its influence on the global oil market. While the oil-producing group has successfully navigated challenges and kept production cuts in place, Hari emphasized that its ability to significantly raise prices is constrained.
“OPEC+ has demonstrated cohesion despite speculation, but it doesn’t have the capacity to push oil prices substantially higher,” Hari said. She pointed to the group’s decision to delay the unwinding of its 2.2 million barrels per day production cuts three times, underscoring their commitment to maintaining stability in the market.
Hari suggested that OPEC+ is more likely to continue its cautious approach, aiming to establish a price floor around $70 per barrel for Brent crude, rather than pursuing a significant price increase. “I believe OPEC+ will remain patient and focus on maintaining a floor at around $70,” Hari said. “They don’t have the bandwidth to prop prices much higher.”
Since its formation in 2016, OPEC+—a coalition of OPEC countries and top non-OPEC oil exporters—has worked to stabilize oil prices through coordinated production cuts. Despite these efforts, Hari stressed that the group’s patience may be the limit of its power, as they manage cuts without pushing prices beyond a certain point.
The outlook for U.S. oil production also plays a role in the global market dynamics. Hari noted that U.S. production has grown by an estimated 300,000 barrels per day this year, a significant drop from last year’s 1 million barrels per day increase. “The growth rate is slowing, and we expect similar growth next year,” she said.
While U.S. energy policies under President-elect Trump have sparked speculation, Hari pointed out that U.S. producers are making decisions on capital expenditure and drilling based on market conditions, rather than policy shifts.
Hari also highlighted that oil production growth will come from countries outside the U.S. in the coming years, including Canada, Brazil, Argentina, Guyana, and Norway. As long as oil prices remain above $65 to $70 per barrel, these nations are expected to increase output, adding to the global supply.
With OPEC+ focusing on price stability, U.S. production growing modestly, and rising output from other regions, the global oil market is likely to remain in a delicate balance. While OPEC+ continues to play a significant role in managing the market, its capacity to push prices much higher appears limited, as other supply sources come online.
