Saudi Arabia, Russia, and six other key members of the OPEC+ alliance announced on Saturday that they will increase oil output by 548,000 barrels per day (bpd) starting in August, exceeding market expectations.
Analysts had anticipated a more modest hike of 411,000 bpd, in line with the group’s previous monthly increases for May, June, and July.
In a joint statement, the alliance cited a “steady global economic outlook and current healthy market fundamentals, as reflected in low oil inventories” as the basis for the larger-than-expected decision.
Jorge Leon of Rystad Energy said the move reinforces a strategic shift in OPEC+ policy:
“OPEC+ keeps surprising the market. This latest hike was larger than expected and sends a clear message: the group is now firmly focused on regaining market share.”
Leon pointed to two key questions now facing the market: First, will the group move next to unwind the remaining 1.66 million bpd in voluntary cuts, once the current 2.2 million bpd reductions are fully reversed? And second, is there sufficient global demand to absorb that additional supply?
“With prices holding comfortably above $60 and ongoing geopolitical uncertainty—particularly the fragile Middle East ceasefire and instability in Ukraine and Libya—the answer to both might be ‘yes’,” Leon added.
Giovanni Staunovo, an analyst at UBS, noted that persistent overproduction by countries like Kazakhstan and Iraq may have influenced the decision:
“Their continued output above quota likely supported the move to accelerate the unwind of cuts.”
The decision follows recent volatility triggered by a 12-day conflict between Iran and Israel, which temporarily pushed oil prices above $80 per barrel amid fears of a potential shutdown of the Strait of Hormuz—a critical route for roughly 20% of global oil flows.
OPEC+, which includes the 12 members of the Organization of the Petroleum Exporting Countries and their allies, began coordinated production cuts in 2022 to stabilize prices. However, in a notable policy reversal, eight member nations—led by Saudi Arabia—announced significant output increases starting in May, catching markets off guard and pushing prices downward.
Oil has since traded in the $65–$70 per barrel range.
Analysts suggest that by authorizing another output hike, Saudi Arabia may also be applying indirect pressure on non-compliant members. The increased supply could suppress prices, diminishing profits for those failing to adhere to agreed quotas.
A Bloomberg estimate showed that, despite the doubling of quotas in May, the alliance’s actual production rose by only 200,000 bpd—well short of the target.
AFP
