At the core, group cohesion has been Opec-plus’ secret for success, and, like a tea bag, group dynamics work best when dipped in hot water. With an array of challenges for oil markets this year, the group may be in for another test.
Opec-plus is committed to the latest pact, inked late last year, that delayed the start of the gradual unwinding of 2.2 million barrels per day of cuts until the end of the first quarter, with another 2 million b/d to stay in place until the end of 2026. When the group met in December, the market mood was strongly bearish, with prices falling under $70 and traders fixated on weak demand numbers coming out of China.
But a lot has happened since the group’s last meeting. US President Donald Trump is back in office and is taking aim at pinching off petrodollars for Russia, Iran and Venezuela. Those threats come off the back of a massive new round of US sanctions on Russian oil as a final parting shot by Joe Biden’s administration earlier this month. This current and potential assault on supply, plus the steady drawing of OECD crude stocks in the back half of last year, has flipped the bearish sentiment. Oil prices have risen, with Brent trading around $80 for the first time since October 2024. As if on cue, Trump told the World Economic Forum in Davos last week that he wants Opec to bring down prices.
In theory, this gives Opec-plus the opportunity that it has craved for almost a year: a window to increase production again and bring in more revenue. Member states have been making the case for months that market fundamentals have been tighter than the market had appreciated.
Inside the group, there are states eager to increase production. Collectively, Opec has made deeper voluntary cuts to keep the market in balance over this period, shutting in a total of around 3.86 million b/d.
So will there be a group decision to quickly get more oil on the market? Or might individual Opec-plus states start slipping more barrels into the market, eroding the strict compliance regime put in place in 2024 to put a floor under prices?
The answer to both questions is no, according to recent soundings from inside the group. What appears to be prevailing over this temptation is the need for the group to maintain a united stance when it comes to production policy. Cohesion keeps the group’s influence over the markets and maintains balance.
Overall compliance has held well under the agreement. The 18 Opec-plus members with monthly targets produced 33.6 million b/d in December, which came in 90,000 b/d lower than the collective target for the group, according to Energy Intelligence assessments. Saudi Arabia and other member states have worked extremely hard to tighten up compliance, and it has paid off.
Inside the group, there is a broad understanding that members will not take any unilateral action to alter production policy, Energy Intelligence understands. More importantly, the group of countries offering the voluntary cuts are fully committed to only act in unison, say insiders.
Aside from the priority of sticking together, there is also the unwritten rule that Opec should not benefit from sanctions levied at members. So veterans at Opec are well aware that the array of new — and future US sanctions threatened by Trump — could lead to strains in relations and raise questions over market share.
That’s why the current Opec leadership believes that decisions related to the return of barrels must be carefully considered and agreed on by all member states. Expect a cautious approach by Opec-plus to prevail, not a knee-jerk reaction.
In practice, it means the group will likely take time to see the impact of geopolitical factors on market fundamentals, setting aside the increase in prices, before it makes any policy decisions.
Uncertain Impact of Sanctions
Trump has been talking about a tougher line on Russia, Iran and Venezuela, but the actual impact on the market will take time to become apparent.
In the case of Biden’s raft of sanctions against Russian exports, there are questions about how much long-term impact they will have. The sanctions target a long list of entities across Russia’s oil and gas supply chain, including Russia’s third- and fourth-largest oil producers and exporters, Gazprom Neft and Surgutneftegas, and more than 180 tankers belonging to Russia’s “shadow fleet.”
However, Russia is experienced in adapting its trade practices to keep production high: It shrugged off the barrage of oil and financial sanctions in the wake of its invasion of Ukraine in 2022. Trading sources believe Russia will find ways around the latest package as well.
On Iran, Trump surrogates have been very hawkish, and the market is baking in harsher sanctions on Iranian crude and product exports, but the devil will be in the details. During his first term (2017-21), Trump pulled out of the 2015 nuclear pact with Iran and world powers, hoping to strike a better deal. When one did not immediately materialize, he imposed new sanctions that brought down Iranian oil exports from a high of 2.8 million barrels per day (excluding condensate) in April 2018 to less than 400,000 b/d in the following year. Later, he granted waivers to eight countries.
Trump has also put Venezuela in his crosshairs, saying last week that the US would “probably stop buying oil from Venezuela.”
The US imported an average of 230,000 barrels per day of Venezuelan crude in 2024, up from zero in 2022, at which point the Biden administration granted a special sanctions exemption for US major Chevron to operate on its Venezuelan license.
Navigating the tensions that sanctions create on its members is not new for Opec-plus, and the group has managed to find creative solutions for tough problems.
In 2018, for example, certain Opec ministers were pushing to hike production and spent days of tense negotiations to gain the support of Iran, Iraq and Venezuela, which opposed the hike because they had no spare capacity.
In a classic Opec compromise, a unanimous deal was reached to target 100% compliance — and did not spell out a specific volume. Since Opec was underproducing its collective target by around 1 million b/d, member states with spare capacity could quietly fill that gap.
Today, it is too early to understand the impact of these geopolitical changes on the market. In the meantime, Opec-plus is keen on maintaining that delicate balance to maintain cohesion, even if that involves a compromise in how the new pact is framed.
Amena Bakr is a senior research analyst with Energy Intelligence. The views expressed in this article are those of the author.