The Narrative That The Saudis Will Launch An Oil Price War Should Go Right Out Of The Window After This OPEC+ Meeting

When it comes to oil market analysis, the worst bear argument I've seen thus far is that Saudi Arabia will launch another oil price war because of OPEC+ disunity. These bear arguments center around the idea that the "excess" spare capacity and the persistent production cut are unsustainable and will eventually force the Saudis to increase production to regain market share.

With the conclusion of the OPEC+ meeting today, those arguments are as good as dead.

Source: Amena Bakr

This chart created by Amena Bakr best illustrates the different layers of the production cut.

At the bottom layer, the "collective group cut" layer, is the production cut that's not really a production cut. The ~2 million b/d here uses an arbitrarily large production cap figure for countries like Saud and UAE. For many of the other countries in OPEC+, the ceiling was put in place because of the inability to produce to that ceiling (natural declines). By virtue of the higher ceiling, it looks like the other producers are cutting. The only countries reducing production per the collective group cut are Saudi, UAE, Kuwait, Iraq, Russia, and Kazakhstan. Everyone else is just freeloading by underproducing due to the inability to increase production.

Now moving over to the voluntary production cuts. There are two layers to this. Amena's chart shows that the second layer of voluntary cuts, ~1.66 million b/d, has been extended to the end of 2026, while the first layer (the real production cut) has been extended to Q1 2025 with a gradual increase starting in April 2025.

The above table shows the gradual production increase from each of the 8 countries. Note that the production increase is expected to be phased in slowly into 2026.

The other important detail in this is that UAE, which was slated to have its production cap increase by ~300k b/d starting in 2025 has agreed to delay the increase by 3 months. And when it does get to start increasing production, the ~300k b/d is phased over 18 months instead of 9 months.

In my opinion, one can argue over whether or not these production cuts will be effective in pushing oil prices higher or not, but one can no longer make the argument that OPEC+ disunity exists. The risk of an oil price war has gone down significantly, so if you see anyone spew this nonsense, you know they are not changing their opinion based on the changes in facts.

How will this impact global oil supply & demand balances?