OPEC+ will meet on Sunday to decide its next production step amid increased geopolitical 'friction' affecting almost a third its output. This volatility could give the group the cover it needs to maintain its narrative of a balanced market, even if the reality on the ground suggests otherwise.

After a three-month hiatus due to a weak season, the group, made up of the Organization of the Petroleum Exporting Countries (OPEC) and its allies, such as Russia, is expected to decide at their meeting on Sunday that they will increase production by?137,000 bpd in April. This would be a sign of confidence in the group’s projections that global oil demand and supply will remain roughly balanced through 2026. This is in contrast to the International Energy Agency’s forecast that there will be a massive oversupply in that year of 3.7 millions bpd.

There are signs that the oil market may be loosening. These include increased global production, increasing inventories onshore and offshore, and slower demand growth. The IEA has lowered its forecast for the growth of global oil demand in 2026 from 900,000 bpd to 850,000 bpd this month, a reduction of around 80,000 bpd compared to its January forecast. OPEC analysts have recently predicted that the demand for OPEC+ oil will drop by 400,000 bpd from the previous quarter,?to 42,2 million bpd due to increased production in other countries. The group believes that demand for its crude will rebound by 1.2m bpd during the third quarter. This is in line with their claim that the market would remain "in balance" this year.

GEOPOLITICAL STORM

The rising geopolitical risks have masked signs of underlying weakness, but they haven't caused a drop in crude prices. Brent crude oil prices, a global benchmark, have reached $70 per barrel, their highest level since August. This is due to the escalating tensions on many fronts.

Venezuela, for example, is under Washington's control and has been subjected to Washington-imposed sanctions. Around a third of OPEC+'s production - 13.5 million bpd – is also now exposed to a U.S. threat. This market is currently facing the biggest risk due to the current standoff between Iran and the U.S. The U.S. and Iranian officials are set to hold a third indirect round of talks on Thursday, in Geneva, in an attempt to reach a 'deal'?over Tehran’s nuclear ambitions. However the differences between the two sides appear wide. The U.S. is building up a massive military presence in the Middle East. This region exports roughly 20 million barrels per day of crude oil, and refineries products. A prolonged military presence here could cause severe disruptions to the oil and gas market.

The tightening of Western sanctions against Russia, which has been waging a full-scale invasion in Ukraine for five years, continues to cause severe distortions on the energy markets. They are affecting Russian production which, according to IEA, was 350,000 bpd less than the 9.57 million bpd OPEC+ quota in January.

Indian refiners are also having difficulty placing their crude oil as they have drastically reduced purchases due to the interim trade agreement that India has signed with the U.S.

According to Kpler, data analytics company, the volume held by Russian crude on tankers in recent weeks has been near a record of around 155 millions barrels. This is a significant contributor to the increase in global inventories.

The large accumulation of sanctions oil in the last few months from Russia and Iran has distorted global balances, and supported oil prices, despite signs that demand growth was slowing.

GOLDILOCKS INCREASE OUTPUT

OPEC+ tends to ignore geopolitical turmoil and focus on fundamentals of supply and demand. This time, it's headline noise which may allow the group to pursue their desired strategy.

Saudi Arabia, Russia and the United Arab Emirates -- as well as Kazakhstan, Kuwait and Iraq -- are the eight major OPEC+ producers. They have increased their production quotas between April 2025 and December 2025 by about 2.9 millions bpd, which is equivalent to roughly 3% global demand. This was done despite the IEA forecasting a growing supply glut. The group took a break of three months.

OPEC+ Ministers could be forgiven if they chose to wait and see rather than increase production immediately, given the uncertainty that hangs over the oil market.

Continuing the pause could undermine confidence in the authority of the group, since it is clear that the group believes that higher production levels are warranted.

OPEC+ could decide to increase output modestly, not so much as to affect global supplies but enough to show confidence in the market.

The producer group would be unable to meet its goals if it wasn't for the heightened geopolitical tensions, and the lack of clarity regarding global supply.

You like this column? Open Interest (ROI) is your new essential source of global financial commentary. Follow ROI on LinkedIn and X. Listen to the Morning Bid podcast daily on Apple, Spotify or the app. Subscribe to the Morning Bid podcast and hear journalists discussing the latest news in finance and markets seven days a weeks.

(source: Reuters)