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OPEC+ will increase production again next month as the Saudi-led oil cartel is about to gain market share in a move that is likely to put downward pressure on crude oil prices.
Eight members of the producer group, including Saudi Arabia, the United Arab Emirates and Russia, said on Saturday that it would raise 548,000 barrels a day in August at a total of 548,000 barrels in August from the planned July increase of 411,000 b/d.
This move speeds up the rewinding of years of production cuts. OPEC+ had been suppressing supply in an attempt to support prices since 2022, but reversed its policy in April.
The group’s initial plan saw a 2.2mn b/d increase in headline output over 18 months, but the supply pace has been increasing since May. It is possible that all IDLED productions were restored by the end of September a year before the original schedule.
“OPEC+ continues to surprise the market,” said Jorge Leon, a former OPEC employee at energy consultant Tristad. “This sends a clear message that the group is shifting firmly towards a market share strategy for those who are still suspicious.”
One reason for tracking production quickly is that oil demand is generally stronger during the summers of the Northern Hemisphere due to the activities of US and European refineries and summer operating seasons, analysts said.
In the long term, production increases could threaten to increase what most traders expect to have a significant supply surplus by the end of the year, pushing prices to under $60 per barrel.
Global benchmark Brent crude was priced at $68 per barrel at close on Friday.
OPEC+ members and those familiar with group thinking provide a variety of explanations about the group’s commitment to restoring idle supply despite the negative impact on prices. I largely agree that the rapid rewinding is driven primarily by Saudi Arabia’s Energy Minister Abdullaziz bin Salman.
Saudi Arabia had the largest share of the cuts, but other OPEC+ members were consistently producing above quotas, reducing the overall impact of the effort. By April, Saudi Arabia had fallen by a fifth over the past three years to about 9 million b/d.
Saudi Arabia tried to restore discipline by agreeing to a new plan to compensate for overproduction, but it appears that some OPEC members, particularly Kazakhstan, ignored those directives and continued to pump oil beyond the quota.
As the cuts no longer supported prices, it no longer makes sense to hold down supply for other major producers such as Saudi Arabia and the UAE, analysts said.
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The cartel’s double victory allowed production to rise and prices to fall also helped his favor with President Donald Trump, who repeatedly called for cheaper oil, while hurting US shale producers.
The next question for the oil market is whether the group will move to unleash a second voluntary cut. This is scheduled to remain until the end of 2026.
“Now, two big questions are on the market,” he said. “Does OPEC+ target the next layer (of the cut)? Is there enough demand to absorb that?”
