OPEC and the limits of power over global oil markets

OPEC+, the alliance of major oil-producing countries led by Saudi Arabia and Russia, has long relied on production quotas to influence global oil prices, adjusting supply to balance the competing interests of producers and consumers. But the war involving Iran has exposed the limits of controlling how much oil is pumped when the greater obstacle is getting it to market.

On November 1, seven members of the alliance agreed to maintain their December production targets, effectively postponing further adjustments despite elevated prices and continued supply disruptions. Ordinarily, producers can ease shortages by increasing output when prices rise. But several Gulf members are already producing less than their existing quotas permit, as damaged infrastructure and disruptions to shipping routes prevent them from fully supplying international markets.

With inventories dwindling and transportation costs elevated, raising production targets offers little protection against further shortages. As the alliance prepares to negotiate its 2027 quotas, it must reconcile immediate supply constraints with the prospect of excess oil once Gulf exports recover.

When production quotas lose their meaning

The effectiveness of OPEC+'s production quotas depends on members being able to deliver the oil they agree to pump.

The war has complicated that calculation. According to the International Energy Agency’s (IEA) October 2026 Oil Market Report, Saudi Arabia produced approximately 8.3 million barrels per day in September, more than 2 million below its production target of roughly 10.5 million. Iraq and Kuwait have also operated below their permitted levels.

The November decision kept seven countries' combined production targets at approximately 31 million barrels per day, following earlier increases totaling 1.65 million. A separate reduction of approximately 2 million barrels per day remained in place through December.

Quota adjustments, however, offer little relief when unsafe shipping routes or damaged infrastructure prevent additional exports. Countries capable of expanding output may seek greater market share, while producers constrained by conflict risk losing revenue and influence despite possessing substantial reserves.

The limits of alternative routes

Disruptions in the Strait of Hormuz have made access to international markets as important as production capacity. Connecting the Persian Gulf to major global shipping lanes, the passage carried approximately one-fifth of global petroleum liquids consumption before the war.

The U.S. Energy Information Administration's (EIA) 2026 World Oil Transit Chokepoints report estimated that 89% of crude oil and condensate passing through Hormuz in the first half of 2025 was destined for Asian markets. China, India, Japan, and South Korea accounted for nearly three-quarters of those shipments, leaving major Asian economies particularly exposed to disruptions.

Alternative pipelines offer only partial protection. Before the conflict, the EIA estimated that Saudi and Emirati pipelines offered approximately 4.7 million barrels per day of capacity to bypass Hormuz.

Even those alternatives remain vulnerable. Attacks on Saudi Arabia's East-West pipeline in September temporarily interrupted shipments exceeding 5 million barrels per day, contributing to a surge in Brent crude prices to $131 per barrel on September 15.

The disruption has also increased the cost of delivering available oil. In an October 12 statement, OPEC ministers warned that shipping and insurance expenses had exceeded one-third of commodity value, adding inflationary pressure and complicating international energy trade.

A market running down its reserves

As exports remain constrained, inventories have absorbed part of the supply shortfall, providing temporary protection against more severe shortages.

The IEA reported that global oil inventories declined by 509 million barrels between the end of February and September, with oil stored in land-based facilities approaching its lowest levels since at least 2016.

The pressure is particularly acute in refined products. Middle Eastern exports of petroleum products reached just 1.9 million barrels per day in September, compared with 4.7 million before the war, according to the agency. Global diesel exports were approximately 700,000 barrels per day below their level a year earlier. 

These shortages carry consequences for transportation, agriculture and manufacturing, where fuel costs influence production expenses and consumer prices.

They also expose another limitation of OPEC+'s influence. Even when additional crude becomes available, damaged refineries, insufficient shipping capacity and depleted fuel inventories can delay relief for consumers.

The uncertainty of 2027

The alliance's next difficulty may emerge not from insufficient supply but from its recovery.

The IEA forecasts global oil production rebounding by 7.7 million barrels per day in 2027 after contracting by 5.8 million in 2026, assuming Gulf infrastructure and exports recover. Demand, meanwhile, is expected to recover more slowly, raising the possibility of a surplus if additional oil returns to international markets.

Such an outcome would place OPEC+ in a difficult position. Producers whose exports have been constrained by war may be reluctant to accept renewed cuts just as they regain access to international markets. Yet allowing production to rise without restraint could accelerate price declines, undermining government revenues across oil-dependent economies.

These competing interests will complicate negotiations over 2027 production quotas at the alliance's November 29 meeting, as members weigh recovering lost market share against supporting prices.

OPEC+ retains considerable influence over global oil supply, but the war has exposed the limits of production agreements when shipping routes and infrastructure remain vulnerable. How much oil reaches consumers now depends as much on geopolitical developments as on decisions made by the producers themselves.