OPEC+ Raises Oil Production by 548,000 Barrels Per Day Exceeding Expectations

SadaNews - The OPEC+ alliance has decided to increase its oil production by 548,000 barrels per day in August, exceeding the increases it approved over the previous three months, as part of its efforts to regain market share lost to competitors during the period when it reduced its supplies to maintain balance between supply and demand in the market.

Eight key members of the bloc met virtually on Saturday, including Saudi Arabia, Russia, Iraq, the UAE, Kuwait, Kazakhstan, Algeria, and Oman, according to a statement issued on Saturday.

In recent months, there have been notable shifts in the policy of the Organization of the Petroleum Exporting Countries "OPEC", as it accelerated the restoration of the production it voluntarily reduced, despite weak demand and increasing signs of an imminent surplus in supply, which put pressure on oil prices and provided relief for consumers, and was welcomed by U.S. President Donald Trump, who is calling for lower fuel prices.

The eight main members of "OPEC+" had already agreed to increase production by 411,000 barrels per day during May, June, and July, which is three times the rate originally planned.

The larger increase in August will allow OPEC+ to complete the return of 2.2 million barrels per day of previously halted production by September, with another increase approaching the same level, according to a representative in the bloc for "Bloomberg".

OPEC+ Flexibility Supports Market Stability

The alliance attributed the increase in supplies to "stable global economic forecasts, and the sound fundamentals of the market currently, as reflected in lower oil inventories." It reiterated its indication of the possibility of temporarily halting the gradual increases, or reversing them, depending on how market conditions develop, noting that this flexibility will allow the bloc to continue supporting the stability of the oil market.

The eight OPEC+ countries also indicated that this decision will provide an opportunity for participating countries to accelerate their compensations for the surplus supplies. The eight countries will meet on August 3 to determine production levels for September, according to the statement.

Oil prices fell on Friday amid anticipation of the "OPEC+" meeting, as Trump's threats to impose tariffs affected global risk appetite. West Texas Intermediate crude prices dropped below $67 per barrel after a 0.7% decline on Thursday. Meanwhile, Brent crude hovered around $68 per barrel, down 13% over the past two weeks. The shift from the open conflict between Israel and Iran, a major oil-producing country and OPEC member, towards a fragile truce ensured that energy exports from the Middle East were not significantly affected.

Several representatives from OPEC member countries who spoke earlier with "Asharq" agree that there are a number of reasons behind the shift in OPEC+'s approach, most notably meeting the increasing demand, especially during the summer, alongside efforts to regulate the production of members who exceeded their quotas, alleviating concerns of U.S. President Donald Trump regarding prices, and regaining market share.

An informed source told "Asharq" that Saudi Arabia is eager to restore its halted production as soon as possible, after becoming fed up with ceding market shares to U.S. shale oil producers, and countries that did not adhere to their quotas within the "OPEC+" alliance and other competitors.

At the same time, this move represents a new step towards the quick cancellation of the production cuts previously decided by "OPEC+", bringing the alliance closer to fully recovering the quantities that were withheld. However, this step comes at a critical moment, as global demand growth remains unstable, affected by weakened industrial activity in China and ongoing trade uncertainties. Meanwhile, production from outside "OPEC+" continues to rise steadily, led by the United States, Brazil, and Guyana, making it difficult for the market to absorb additional supplies from the alliance without encountering surplus.

OPEC Production Increase

The Organization of the Petroleum Exporting Countries "OPEC" has increased its crude output at the highest rate in four months, with Saudi Arabia leading an increase in oil exports from the Middle East in an effort to regain its market share, according to a previous survey by "Bloomberg".

Bloomberg Intelligence's analyses of different scenarios increasingly suggest that a surplus of over one million barrels per day could emerge in the second half of the year. Unless "OPEC+" slows its pace of production increases or demand unexpectedly improves, prices may remain under continuous downward pressure until the end of the year.

For its part, the International Energy Agency expects the market to witness a significant oversupply in the second half of the year, while financial institutions like "J.P. Morgan Chase" forecast ongoing pressure on prices in the coming period.

Strengthening Prices Against Shocks

At the same time, the production cuts implemented by the bloc have led to an accumulation of surplus in the production capacity at "OPEC", but the current plan for gradual removal of restrictions will lead to a reduction of that surplus. The organization has maintained substantial reserves since the COVID pandemic, which was one of the main reasons for bolstering prices against supply shocks. Additionally, an abundant supply has reduced the chances of a sudden price spike.

Data from "Bloomberg Intelligence" indicates that Saudi Arabia holds the lion's share of the surplus production capacity at "OPEC" at 47%, followed by the UAE at 23%, then Iran and Iraq at 9% each, totaling approximately 6.6 million barrels per day.

OPEC's share of total global crude and condensate supplies has fallen by about 10 percentage points over the past decade. This was mainly at the expense of North American shale oil producers, whose share increased by nine percentage points.

Bloomberg Intelligence analysts state: "Although the decline in oil demand growth - as a result of increased fuel consumption efficiency and steady growth of electric vehicles - may raise doubts about the group's importance, its management of supply in 2020 proved its significance in rebalancing the market and mitigating volatility."

The International Energy Agency expects OPEC's oil demand to reach about 26.5 million barrels per day, down from 27 million in 2024 and 28.4 million in 2023. Similarly, both OPEC and the U.S. Energy Information Administration reduced their global oil demand estimates for the organization in 2021 due to expectations of declining oil demand and increased production elsewhere.