OPEC+ energy ministers are engaged in another round of recriminations and handwringing, having delayed their scheduled meeting from December 1 to December 5 to give them more time to argue. Yet, whatever deal they eventually hash out among themselves will not change their core predicament: their quest for sustainably higher prices has failed due to competing supply growth, largely from the United States. Even Saudi officials have recently acknowledged that OPEC+ producers will need to return to a strategy of reclaiming market share despite the kingdom’s budgetary needs.

Those who have followed my views over the last decade know that I have long been skeptical that OPEC (now OPEC+) can prop up prices over a long period of time, given the short-cycle nature of U.S. shale oil production. It can be effective in offsetting periods of weakness in demand, such as during the COVID-19 Pandemic and the attendant recession in 2020. Still, we have now had two cycles in which production discipline has led to prices pulling back on supply growth, which exceeded the recovery in demand. 

The cycle, which began with the “Vienna Agreement” cuts announcement in November 2016, had already subsided prior to the 2020 COVID-19 Pandemic. The cuts successfully drained inventories, but Brent crude oil price pulled back to an average of $64 per barrel in 2019. After a brief Saudi-Russian price war in the early days of the pandemic, OPEC+ again was successful at rapidly draining the overflow in inventories, pushing Brent above $100 per barrel for a few months in the first half of 2022 before the surge ebbed. In both of these cycles, non-OPEC+ production responded to the surge in prices, eventually leading to a cooling of the market as OPEC+ grappled with unwinding the cuts.

The potential of U.S. shale production is obviously not unlimited. The false hope for oil bulls in both of these cycles was that demand growth would surge back strongly enough to soak up not only the higher U.S. production but also OPEC+, putting barrels back on the market. That has not happened, even though the United States and world economies have seen reasonably strong growth in GDP in 2024. In part, this is due to the economic slowdown in China, but it is also due to surging sales of EVs. Some analysts believe the Chinese oil market may soon reach “peak oil demand.” That does not mean peak demand globally, given the stronger growth in India and other emerging economies. Still, it means growth that is slow enough to make it difficult for OPEC+ to unwind production cuts without prices heading to a level that would throttle U.S. production.

This is doubly troublesome for Saudi Arabia, which undertook what some saw as a bold move in July 2023 by cutting its own production an additional 1 million bpd beyond its quota. Saudi energy minister Prince Abdulaziz bin Salman memorably termed this decision as a “lollipop” for the oil market. The impact on prices was short-lived, but it helped propel an increase in the rate of growth for U.S. production in 2024. It also presents a problem for unwinding the cuts, as Saudi Arabia naturally wants to unwind its unilateral cut before raising quotas for others. Crown Prince Mohammed bin Salman is too young to remember the 1980s when unilateral cuts forced the kingdom to reverse course sharply, giving up the swing producer role and intentionally flooding the market in 1985.

Meanwhile, strains in the cartel are beginning to become pronounced. The UAE, which had new production capacity completed as this round of cuts began, successfully lobbied Saudi Arabia to give it an increase in its quota relative to the others at the June 2024 OPEC+ meeting, phased in over the first nine months of 2025. That came as the UAE seems to have been cheating already, based on shipping data. Kazakhstan, which is not a formal member of OPEC, has also been producing well above its quota, as new capacity has come onstream at the Tengiz field in the Caspian. Iraq has been browbeaten into promising to make “compensation cuts” to offset recent overproduction. Yet, it remains to be seen if that will materialize.

The question at this point is whether OPEC+ will opt to feel the pain of lower prices now or postpone the unwinding yet again in the hopes of a surge in demand growth. For Saudi Arabia, staying with such a large unilateral cut below their production capacity indefinitely is not the revenue-maximizing option, as recent official comments to The Financial Times suggest. They had previously hoped for a “last hurrah” in the oil market throughout the latter 2020s. This assessment was based on underinvestment by foreign consumers and strong demand growth that would fund MBS’ Vision 2030 program of economic diversification. However, this project now seems increasingly limited by austerity. Things may look very different for Russia, though, where the need for near-term revenue to fund its war in Ukraine may make the short vs long-term tradeoff look very different.

Greg Priddy is a Senior Fellow at the Center for the National Interest and does consulting work related to political risk for the energy sector and financial clients. Previously, he was director of global oil at Eurasia Group and worked at the U.S. Department of Energy.

Image: Maksim Safaniuk / Shutterstock.com.