Eight OPEC+ member countries, including Saudi Arabia, Russia, and six others, will increase oil production by 411,000 barrels per day in June, up from an initial plan of 137,000, according to an OPEC+ statement. This follows a similar increase in May and signals a shift in strategy after years of production cuts to boost prices.
The 22-member group had previously used supply scarcity to drive up oil prices, holding millions of barrels in reserve. However, the recent move marks a decisive change, with analysts like Jorge Leon of Rystad Energy calling it a “bombshell” for the market.
“This is a definitive message that the Saudi-led group is shifting focus to market share after years of reducing output,” Leon said. The change also coincides with efforts to improve relations with the U.S. after former President Donald Trump urged Saudi Arabia to increase production in 2017.
The decision follows a slight downward revision in OPEC+’s global oil demand forecast, partly due to the impact of U.S. tariffs. The group’s earlier strategy involved voluntary cuts to keep oil prices high, but now, several members, including Kazakhstan, have ramped up production, potentially violating quotas.
The increase could be driven by internal tensions, with some countries exceeding their quotas without compensating for the extra production. It also comes amid uncertain geopolitical developments, including stalled talks on Iran’s nuclear program and a potential loosening of U.S. sanctions on Russia and Iran, which could lead to more barrels entering the market.
Despite the logic behind the ramp-up, the move risks further depressing oil prices, which have already fallen to around $60 per barrel. Analysts warn this could hurt U.S. shale producers, who face breakeven costs above $55 per barrel.
The price drop has been significant since Trump’s return to office, with oil plummeting from around $80 per barrel to lows not seen since February 2021. The global demand forecast has been cut, especially with fears of a trade war between the U.S. and China, two of the world’s largest oil consumers.
