FRANKFURT, Germany — On Thursday, the OPEC+ coalition of oil-producing nations is set to deliberate on the possibility of delaying its plans to increase crude oil production due to several factors, including slow demand and rival production from countries outside the alliance. This outcome could contribute to stagnant oil prices extending into the next year.
A significant advantage of this decision would fall to drivers in the U.S., where gasoline prices have dipped to their lowest levels in two and a half years, nearing $3 per gallon.
The OPEC+ group, which features Saudi Arabia as the key player in the OPEC producers’ cartel and Russia as the principal non-OPEC member, is convening online to assess whether to postpone production hikes that are anticipated to commence on January 1. Initially, eight OPEC+ countries aimed to gradually restore 2.2 million barrels per day from previous cuts starting from the new year. However, analysts now suggest that the group may choose to defer these increases for an additional three months as they monitor market demand.
Oil prices have been under pressure, primarily due to disappointing demand from China as well as increased production from nations like Brazil and Argentina, which are not part of OPEC+. Analysts are re-evaluating their demand forecasts for next year, indicating that OPEC+ may face challenges well into 2025.
Saudi Arabia is in need of oil revenue to support Crown Prince Mohammed Bin Salman’s ambitious initiatives to diversify the economy, notably the creation of Neom, a futuristic city project costing $500 billion. Conversely, Russia relies heavily on oil export revenues for its government finances and for funding its ongoing military operations in Ukraine. However, curbing production could result in a loss of market share, while ramping up production might lead to lower prices in what analysts characterize as a well-supplied global oil market.
Currently, U.S. oil prices have stabilized around $70 per barrel, trading at $68.92 ahead of the meeting—a significant decline from August’s prices of $80. The international benchmark for Brent crude is at $72.66 per barrel, down from approximately $80 in July.
As a direct result of these lower prices, the average gasoline price in the U.S. has descended to $3.03 per gallon this week, marking the lowest level since May 2021 and a steep drop from its record high of $5.02 in June 2022, according to AAA. There are now 31 states in the U.S. with average gasoline prices below $3 a gallon.
According to AAA spokesperson Andrew Gross, oil prices in the U.S. remaining at or below $70 are beneficial for consumers since crude oil makes up about half of the overall cost of gasoline, alongside distribution costs and taxes. In Europe, fuel prices fluctuate less dramatically because taxes constitute a larger portion of the total cost.
OPEC has downgraded its forecast for demand growth in 2025 to 1.54 million barrels per day, down from 1.85 million announced in July. The revised figure remains relatively high compared to estimates provided by other agencies, including the International Energy Agency predicting 990,000 barrels per day, the U.S. Energy Information Administration with an estimate of 1.22 million, and Rystad Energy forecasting 1.1 million.
Commerzbank analysts predict that Brent oil prices will average $75 per barrel during the first quarter of next year, increasing to $80 for the following three quarters.
In the U.S., the anticipated return of Donald Trump to the presidency might lead to heightened fossil fuel production. The President-elect has advocated for increased drilling activities, and his Treasury secretary nominee, Scott Bessent, has devised an economic strategy aiming to elevate domestic oil production by around 3 million barrels per day. Bessent has signaled that increased oil production could help mitigate inflationary pressures for U.S. consumers. However, the Trump administration has not fully articulated the mechanisms by which oil producers would boost supplies and reduce prices in ways that could negatively impact their profitability.
OPEC, which was originally established in 1960 by Iran, Iraq, Kuwait, Saudi Arabia, and Venezuela, now encompasses 12 member nations. In 2016, in response to plunging oil prices resulting from U.S. shale production, OPEC allied with 10 additional oil-producing countries to form OPEC+.
