Energy Stocks Slide as OPEC+ Signals December Production Hike
Crude prices fall on concerns that a modest supply increase will hit a market already grappling with a softening global demand outlook.
A sell-off rippled through the energy sector on Tuesday after reports emerged that OPEC and its allies are preparing to approve a small oil production increase for December, sparking concerns of a supply glut in a weakening global market.
The news sent benchmark crude prices tumbling, with West Texas Intermediate (WTI) falling below $61 per barrel. The negative sentiment quickly spread to equity markets, hitting major producers. Shares of Exxon Mobil (XOM) slipped in morning trading, while rival Chevron (CVX) also saw declines as investors weighed the impact of lower oil prices on producers' profit margins.
Delegates from the oil cartel have indicated that the group, known as OPEC+, is likely to ratify a modest output hike at its upcoming meeting. While the planned increase is expected to be small, the move to add barrels comes at a delicate time for the market. Investors are increasingly focused on signs of decelerating global economic activity, which could dampen fuel consumption.
This decision appears to be pre-empting a market that is already well-supplied. The International Energy Agency (IEA) recently trimmed its forecast for 2025 oil demand growth, citing a more challenging economic backdrop. The agency now expects global oil demand to grow by only 710,000 barrels per day next year, a figure that underscores the market's sensitivity to any new supply.
The market reaction reflects a broader anxiety that the balance between supply and demand is tilting towards a surplus. "Even a minor increase in production sends a strong signal from OPEC+," said one energy analyst. "It suggests they are more concerned with maintaining market share than aggressively defending higher prices, especially with demand looking fragile."
According to a report from Bloomberg, the production adjustment is seen by some within the cartel as a necessary step to accommodate shifting global energy flows and maintain stability. However, traders appear to be interpreting the move as a bearish signal for prices heading into the new year.
Investors will now be closely watching the official OPEC+ meeting for confirmation of the output policy and any commentary on the group's outlook for 2026. With the U.S. Energy Information Administration (EIA) forecasting an average price of $62 per barrel for Brent crude in the fourth quarter, any deviation from the expected modest supply increase could introduce significant volatility back into energy markets.