CRUDE OIL PRICES AFTER OPEC DECISION
Oil prices have been pressured this year mainly due to geopolitical and economic circumstances, with price movements caused by trade disputes, supply disruptions, and worries over global economic growth. However, the latest OPEC+ moves and geopolitical developments suggest that the outlook might be shifting, suggesting potentially higher oil prices. What are the major factors impacting oil prices amid OPEC’s latest decision?
- WHAT IS OPEC?
OPEC plays a major role in managing global oil supply. Its stated aim is to balance the global oil market. It consists of major oil producers, including Saudi Arabia, its de facto leader, and many other Middle East members. In late 2016, Russia joined OPEC+ as a country that participates in OPEC decisions. Together, the cartel accounts for around 40% of global supply, meaning its decisions are expected to impact oil prices.
- OPEC, MARKET SPECULATION, AND OIL PRICES
Ahead of every OPEC+ meeting, rumours and leaks tend to impact the market prices. Top news agencies like Reuters have sources that often provide information about possible output decisions, which influences oil prices. In the week before the OPEC+ meeting, reports suggested that OPEC would not increase output. This confirmed OPEC+ plans to suspend output until the next quarter. Such a move would mark OPEC’s first change of policy (of increasing output) in eight months. Oil prices rose in the week leading up to November’s OPEC+ meeting.
- NOVEMBER 30 OPEC+ MEETING AND OUTPUT DECISION
On November 30, OPEC+ decided to maintain output at current levels from January. The cartel confirmed that the current plan is to freeze output levels until the end of March. In total, OPEC still has around 3.2 mln bpd of output cuts in place, which represents some 3% of global demand. The immediate market reaction on December 1st, when the markets opened, was an increase in oil prices to hit a ten-day high, although some of those increases were pared by the European session.
- OIL PRICES IN 2025: TRADE FEARS, OIL DEMAND FEARS OUTWEIGH SUPPLY CONCERNS
Oil prices have fallen some 17% so far this year. Much of the negative impact on prices began when President Trump showed a willingness to impose tariffs and risk a trade war, rather than simply threaten one. This culminated in early April when Liberation Day saw US tariffs imposed on multiple countries, sending oil prices to a four-year low, only for some of those tariffs to be suspended days later. While trade deals have now been signed with multiple countries, the uncertainty and increased tariffs have had a lasting impact on the global economy and have somewhat dented oil demand, with the EU, China, and India, all major importers of oil, affected.
- IS THE STAGE SET FOR A COMEBACK IN OIL’S PRICE?
Oil prices were given a boost by US oil sanctions on Russia in late October, but black gold slumped to a fresh low of just above $57 on November 25th. In late November, the US declared Venezuelan airspace closed, with President Trump suggesting that land strikes upon Venezuela might begin. Although Venezuela is subject to some oil sanctions, it remains an oil exporter and has the largest oil reserves in the world. Any military conflict could disrupt supplies. Traders are also looking at the US’ latest peace initiative, with Trump's special envoy Witkoff on his way to Russia for talks with President Putin. Any deal could mean the relaxation of US oil sanctions against Russia, but if a deal fails to materialise, this could support higher oil prices. Additionally, Ukraine continues to strike Russian oil refineries, export terminals, and, in a new move, is now hitting Russia’s shadow fleet of tankers, which transport sanctioned oil around the world.
Conclusion
OPEC+’s output freeze, improving global trade prospects, and potential (largely conflict-related) disruptions offer some hope for a bounce back in crude oil prices in December. The cartel appears to have recognised that market demand isn’t as strong as previous projections and, in response, halted output increases.
Whether prices will rise depends on global demand recovery and geopolitical developments. If trade tensions ebb away and economic growth from countries like China accelerates, oil prices could re-establish an uptrend. But economic underperformance and trade-related disagreements would stymie demand.