Remember when oil was flirting with triple digits just a couple of years ago? Yeah, me too. Fast forward to the end of 2025 and Brent is limping along in the low sixties, down fifteen percent on the year and still looking for the bottom. Over the weekend something pretty telling happened that most mainstream headlines buried in paragraph twelve: the extended OPEC+ club quietly agreed to hit pause – again – on bringing more barrels back to market.
It’s not exactly a shock, but the timing and the tone coming out of the meetings feel different this time. This isn’t the usual “we’ll review next month” dance. This feels like the group collectively looked at the forward curve, saw a mountain of supply coming, and decided ambition can wait.
The Big Decision Nobody Is Shouting About
Eight of the OPEC+ heavyweights – the ones that voluntarily took extra cuts on top of the official ones – have now formally delayed the unwinding of roughly 2.9 million barrels per day that they had started trickling back from April 2025. Instead of the planned monthly increases, output stays flat all the way through the first quarter of 2026.
That’s three extra months of restraint. In a world that’s already swimming in oil, three months is an eternity.
To put it in perspective, the broader alliance still has about 3.24 million barrels per day of official cuts in place – roughly 3% of global demand. The core OPEC cut of 2 million b/d runs all the way to the end of 2026, and the voluntary slice from those eight countries now stays locked until at least April 2026.
Why Now? The Math Is Getting Ugly
Let’s be honest – the oil market outlook has darkened faster than most traders expected even six months ago. Global inventories are building, demand growth is anemic in the places that matter most, and non-OPEC supply (hello American shale, hello Guyana, hello Brazil) keeps surprising to the upside.
Add in the prospect – however remote right now – of some kind of Russia-Ukraine de-escalation and you have the nightmare scenario for anyone trying to defend $70 oil: millions of “clean” Russian barrels suddenly free to flow again without secondary sanction headaches.
“The message from the group was clear: stability outweighs ambition at a time when the market outlook is deteriorating rapidly.”
– Jorge Leon, Rystad Energy (former OPEC analyst)
That quote pretty much sums it up. The cartel isn’t panicking – at least not publicly – but they’re definitely tapping the brakes hard.
The Capacity Fight That Never Ends
One of the more interesting tidbits that leaked out of the weekend meetings is that the group finally approved a new mechanism to reassess member production capacities between January and September 2026. Those numbers will set the baseline quotas starting in 2027.
Why does this matter? Because the UAE has spent years investing billions to pump more, while some African members have seen fields mature and decline. Everyone wants a bigger slice of the pie, and nobody wants to admit their slice got smaller.
Remember Angola walking out in 2024 over exactly this issue? Nobody wants a repeat performance. Getting independent assessors involved – one firm for most countries, special arrangements for the sanctioned trio of Russia, Iran and Venezuela – is the diplomatic way of saying “we’re going to let the data speak, like it or not.”
Brent Below $65 – How Low Can It Go?
Friday’s close near $63 wasn’t pretty. The curve is in steep contango, storage is profitable, and refinery margins are getting crushed. All the classic signs of oversupply.
In my experience, when OPEC+ starts extending and pretending, the market usually tests them. We saw $55 Brent in early 2020 before the pandemic price war, and the conditions right now aren’t dramatically different from a fundamental standpoint.
- China demand growth barely positive
- U.S. shale still adding rigs at $50 WTI
- Record production coming online in Guyana and Brazil
- Possible return of sanctioned barrels if geopolitics shift
- OPEC+ spare capacity at multi-year highs
That’s a tough cocktail to be bullish about.
What Happens If Russia Actually Makes Peace?
This is the elephant in the room nobody in Vienna wanted to say out loud. Fresh diplomatic efforts are apparently underway again to broker some kind of Russia-Ukraine understanding. Success is far from guaranteed, but even the possibility changes the math.
Right now Russian oil flows under a messy web of sanctions, price caps, and shadow fleets. Remove those frictions and you’re easily looking at another 1-2 million barrels per day of supply that the market currently treats as semi-permanently impaired.
OPEC+ knows this. Which is exactly why they’re pumping the brakes now – trying to front-run any potential flood.
The Shale Wildcard Nobody Talks About Anymore
Here’s something that still blows my mind: U.S. shale operators have gotten so efficient that many can add production profitably below $50. Consolidation has created monsters that can hedge two years out and keep drilling through almost anything.
The Permian is on pace for another 400-500 kb/d gain in 2026 even if WTI averages $55. That’s half of what OPEC+ was planning to bring back – except shale responds to price signals in months, not years.
Where Does This Leave Prices Through 2026?
My base case hasn’t changed much: we grind lower into the mid-to-high $50s through the first half of 2026, inventories peak sometime in Q2, and then OPEC+ starts the slow process of opening the taps again once they see draws.
But there are two very different tails:
- Bear case: Geopolitical thaw + recession fears = low $40s aren’t impossible
- Bull case: Major supply disruption (think Strait of Hormuz) or faster-than-expected demand rebound = quick spike back to $80+
Volatility is going to be the name of the game. Anyone telling you they know exactly where oil settles in 2026 is selling something.
What This Means for Energy Investors
If you’re still long pure-play oil producers expecting the old cycle to return, this pause should be a wake-up call. The supercycle many were calling for in 2022-23 looks increasingly like a super-mirage.
On the flip side, refiners and midstream names that make money on volumes rather than crude price could actually do okay in a lower-for-longer environment – as long as demand doesn’t completely roll over.
And let’s not forget the renewable crowd quietly smiling in the corner. Every month Brent spends below $70 makes solar and wind economics look that much better.
Bottom line? OPEC+ just admitted out loud what the forward curve has been screaming for months: there’s too much oil coming, and not enough demand growth to soak it up. Extending the pause buys them time, but it doesn’t solve the structural problem.
We’re entering a period where managing surplus – not scarcity – is the main challenge. And history tells us that when OPEC+ tries to manage surplus, someone eventually blinks.
The only question is who blinks first, and how ugly the price action gets when they do.
Either way, strap in. The next twelve months in oil are going to be anything but boring.
