Last month, OPEC+ agreed to increase oil output from October by 137,000 barrels per day, a much lower clip compared to the 555,000 bpd increase announced for August and September and 411,000 bpd in June and July.
That meant that the group has started unwinding the second tranche of 1.65 million bpd in production cuts more than a year ahead of schedule, having fully unwound the first tranche of 2.5 million bpd since April.
The eight members of OPEC+ are set to meet virtually on Sunday, 5th October, to determine the next course of action in unwinding production cuts. The consensus is for a further 137 thousand barrels per day (kb/d) increase in loadings for November, in the absence of any significant news. Media reports in late September claimed that the group might consider an accelerated rewinding programme, with the remainder being divided into three monthly increases of 500 kb/d. Judging by the still bearish sentiment in oil markets, the second scenario would likely result in an oil price selloff with concerns of oversupply returning to the forefront.
However, it’s more likely that OPEC+ will stick to its former plan, in which case all eyes will turn to Iraq. As expected, OPEC+ outlined the proposed compensation cuts for overproduced volumes by six members, led by Iraq, which has proposed an immediate 130 kb/d adjustment from August 2025 through January 2026, before slowing to 122 kb/d in June 2026. Commodity analysts at Standard Chartered have noted that Iraq will do most of the heavy lifting in OPEC+’s latest round of unwinding, with the country’s cuts alone nearly enough to neutralize the increase by the rest of the members.
In contrast, Kazakhstan has backloaded its compensation schedule, proposing to cut by only 35k b/d in December 2025, before increasing to 100 kb/d in January 2026, 300 kb/d in February, 450 kb/d in March, 490 kb/d in April, 550 kb/d in May, and 650 kb/d in June 2026 for a total of 2.63 mb/d. The analysts have predicted that Iraq’s compliance will be critical for setting market sentiment around the legitimacy of compensation cuts.StanChart notes that Kazakhstan’s plan to backload most of its cuts goes contrary to previous plans to frontload them. Further, the analysts have pointed out that Iraq’s total contribution includes exports from the Kurdistan region (KRG), which is likely to return from suspension imminently, further complicating adherence to compensation cuts.
Meanwhile, the UN has reimposed sanctions on Iran, completing the ‘snapback’ process that was initiated by the UK, France and Germany, marking the effective end of the 2015 nuclear deal (JCPOA). Last week’s meetings on the subject by the United Nations General Assembly (UNGA) were largely unproductive, forcing the UN to restore six former resolutions, including requiring Iran to terminate nuclear activities and enrichment of uranium. However, the most significant for the oil market is a resolution that authorizes the seizure of vessels, including oil tankers, suspected of arms or technology smuggling. Historically, many countries have in the past been reluctant to exercise this seizure authority because it often results in tit-for-tat vessel seizures. According to Kpler data, Iran currently exports ~1.5 million barrels of crude per day, down from 2.3 mb/d it managed before the latest raft of sanctions but more than triple the volumes it did at the end of Trump’s first term in office. A cross-section of analysts has argued that the snapback will have little effect in limiting Iran’s oil exports or its economy:
“I see a limited economic impact, especially when it comes to energy,” Rachel Ziemba, senior advisor at political risk consultancy Horizon Engage, told Argus Media. “This is due to the limited scope of the [returning] UN sanctions, the extent of existing US sanctions, and the breadth of the illicit trading relations,” she added.
Meanwhile, Europe’s gas stores continue filling up, with inventories rising by 0.84 billion cubic metres (bcm) w/w to reach 96.22bcm over the past week. Despite high demand due to the cold weather, Europe’s gas has been trading in a narrow range around €31–€33 per megawatt-hour over the past week to settle at €31.01/MWh in Thursday’s session. EU inventories currently stand at 82.3% of total capacity, with Germany at 76.6% while France and Italy are above 90%.
