OPEC+ has agreed to increase oil production from October, driven by Saudi Arabia’s ambition to reclaim market share. However, the group plans to slow the rate of increase compared to previous months, anticipating a weakening in global demand. This decision, made during an online meeting on Sunday, comes despite expectations of a potential oil surplus during the northern winter months. OPEC+ is a group of oil-producing nations, including the Organization of the Petroleum Exporting Countries (OPEC) plus Russia and other allies, that coordinates petroleum production policies. Their actions significantly impact global oil prices and supply.
The agreement among eight OPEC+ members involves raising production by 137,000 barrels per day starting in October. This is substantially less than the monthly increases of approximately 555,000 barrels in September and August, and 411,000 in July and June. The group has been gradually increasing production since April, reversing previous cuts implemented to support the oil market.
This latest decision also signifies that OPEC+ has begun unwinding a second phase of cuts, amounting to about 1.65 million barrels per day by eight members, more than a year in advance. The initial phase of 2.5 million barrels, equivalent to roughly 2.4 per cent of global demand, has already been completely unwound since April.
According to Jorge Leon, an analyst at Rystad and former OPEC official, the modest increase sends a strong signal. He believes the decision is “less about volumes and more about signalling – OPEC+ is prioritising market share even if it risks softer prices.” OPEC+ has the option to adjust its approach by accelerating, pausing, or reversing production hikes in future meetings, with the next meeting of the eight participating countries scheduled for October 5.
