OPEC+ has agreed to increase oil production by 547,000 barrels per day in September. This decision is the latest in a series of accelerated output hikes aimed at regaining market share, amidst growing concerns about potential supply disruptions related to Russia. The move signifies a complete and early reversal of OPEC+’s most significant output cuts, in addition to a separate increase in output for the United Arab Emirates. This amounts to approximately 2.5 million barrels per day, or about 2.4% of global demand. OPEC+ comprises 10 non-OPEC oil-producing countries, most notably Russia and Kazakhstan. The organisation pumps about half of the world’s oil.
Eight OPEC+ members convened a brief virtual meeting following increasing pressure from the United States on India to cease Russian oil purchases, as part of Washington’s efforts to encourage Moscow to negotiate a peace agreement with Ukraine. In a statement released after the meeting, OPEC+ cited a robust economy and low stock levels as the reasons underpinning their decision to increase output.
Oil prices have remained elevated despite OPEC+’s increased production. Brent crude closed near $70 a barrel on Friday, up from a low of near $58 in April. U.S. light crude oil prices fell by approximately $2 a barrel in early trading in New York on Friday, anticipating the production increase by OPEC and its allies. The group is scheduled to reconvene on September 7, when they may consider reinstating another layer of output cuts totalling around 1.65 million barrels per day.
Jorge Leon of Rystad Energy noted that OPEC+ had successfully reversed its largest cut without causing prices to crash. The next challenge, he added, would be deciding when to unwind the remaining 1.66 million barrels, while managing geopolitical tensions and maintaining group cohesion.
