The recent decision of the Organization of the Petroleum Exporting Countries and allies to boost production further in October likely increases the downside risks for global oil prices, according to Commerzbank AG.
In a move that signals a strategic shift towards regaining market share, the OPEC+ alliance announced on Sunday a further increase in oil production by 137,000 barrels per day (bpd) for October.
This decision marks the commencement of the second phase of reversing voluntary production cuts, initially slated to remain until the end of 2026.
The cumulative impact of these adjustments could introduce an additional 1.65 million bpd into the global market in the coming months, a figure experts believe is unlikely to be the final adjustment.
The next virtual meeting, scheduled for October 5, is anticipated to bring further production increases.
Source: Commerzbank Research
Shifting market dynamics and explanations
The official rationale provided by OPEC+ for the production hike mirrored previous statements, citing a “steady economic outlook, healthy fundamentals, and low oil inventories.”
While this assessment may hold true for current oil stocks in OECD countries, particularly in the US and Europe, it offers a retrospective view.
“This is a look in the rearview mirror,” noted Carsten Fritsch, commodity analyst at Commerzbank AG.
He adds that OECD oil reserves present only a partial picture.
The International Energy Agency (IEA) reported in its August monthly report that global oil stocks have been on an upward trend for five consecutive months, reaching a 46-month high of 7,836 million barrels in June.
This volume is sufficient to cover daily consumption of 21.5 million barrels for an entire year, roughly equivalent to the daily oil consumption of the US.
The current oil market already grapples with a significant oversupply, estimated at more than 2 million bpd in the fourth quarter of 2025 and the first half of 2026.
The continued expansion of OPEC+ production is poised to exacerbate this imbalance, leading to a further accumulation of inventories.
“The already considerable oversupply in the oil market could become even larger due to the continued expansion of OPEC+ production,” explains Fritsch, emphasising the potential for a further build-up of stocks.
Puzzling price reactions and underlying factors
The immediate market reaction to the OPEC+ announcement was somewhat counterintuitive, with oil prices rising by over 2% on Monday.
This increase, however, is largely attributed to prior rumors of the production hike, which had already led to a significant decline in oil prices since the previous Wednesday, Fritsch said.
Chinese crude oil import data, released on Monday night and showing a noticeable increase in August, also provided some tailwind. Nevertheless, the price rally merely offset Friday’s losses, which were triggered by weak US labor market data.
Increased downside risks and a strategic pivot
The OPEC+ decision unequivocally amplifies the downside risks for oil prices, according to Fritsch.
Concerns about looming oversupply had been raised previously, and this latest move by OPEC+ confirms a fundamental shift in the strategy of the expanded production cartel.
The primary focus is no longer solely on stabilizing the oil market and maintaining elevated oil prices but rather on reclaiming market share.
Fritsch added:
To achieve this, OPEC+ appears to be willing to accept temporarily lower oil prices.
The critical question remains: where does the “pain threshold” lie for OPEC+, and at what point will oil prices fall low enough to prompt the group to intervene and restrict supply once again?
Notably, OPEC+ has explicitly kept this option open in its press release.
“Riyadh and its allies signaled a decisive pivot: defending market share now outweighs defending prices,” Rystad Energy’s Chief Economist Claudio Galimberti said in an emailed commentary.
The headline volume may look marginal, but the messaging is not. By allowing supply back into a market moving toward surplus, OPEC+ is playing offense, not defense.
Geopolitical tensions and supply risk offsets
The fact that oil prices have not experienced a more significant decline so far is largely due to the recent increase in geopolitical supply risks.
Ongoing Ukrainian drone attacks on Russian energy infrastructure pose a credible threat of disruptions to Russian oil supplies.
Additionally, the US may intensify sanctions against Russia and its oil buyers if the conflict in Ukraine persists and Russian drone attacks on civilian targets continue.
US President Donald Trump recently issued explicit threats to this effect, aiming to pressure the Kremlin.
US Treasury Secretary Bessent has also raised the possibility of secondary tariffs being imposed by the US and EU on buyers of Russian oil, similar to existing measures against India.
More recently, the US has increased pressure on Iran by adding a network of shipping companies and vessels to its sanctions list for alleged Iranian oil smuggling.
Venezuela has also re-entered the spotlight of the US government, with the Maduro regime linked to drug trafficking. Against this backdrop, the future of the US government’s recent approval for crude oil production and export from Venezuela remains uncertain.
Revised oil price forecasts
In light of the increased downside risks, Commerzbank AG has revised its Brent crude oil price forecast for the coming year downwards to $65 per barrel, a decrease from the previous forecast of $70.
Fritsch added:
Due to the increased downside risks, we are revising our oil price forecast for Brent for the coming year downwards to $65 per barrel.
However, the forecast for the end of 2025 remains at $65 per barrel, factoring in the aforementioned supply risks.
Significant deviations from this forecast are possible in either direction, depending on evolving market news.
The WTI oil price is projected to trade at $62 per barrel, a $3 discount to Brent.
The previous forecast for 2026 was $67.
The diesel price is expected to remain unchanged at $660 per ton at the end of 2025.
The price forecast for the end of 2026 for diesel has been reduced to $630 (from $660) due to the lower Brent forecast, as a lower crack spread is no longer offset by a higher oil price.
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