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Opec+ will increase production again next month as the Saudi Arabia-led oil cartel seeks to win back market share in a move that is likely to put downward pressure on crude prices.
Eight members of the producer group, including Saudi Arabia, the United Arab Emirates and Russia, said on Saturday that they would raise headline production in August by a combined 548,000 barrels a day, up from a planned increase in July of 411,000 b/d.
The move speeds up the unwinding of long-standing production cuts. Opec+ had been holding back supply since 2022 in attempt to prop up prices but reversed its policy in April.
The group’s initial plan would have increased headline output by 2.2mn b/d over 18 months, but since May it has been accelerating the pace of the supply increases. It is now likely to have restored all of the idled production by the end of September, a year ahead of the original schedule.
“Opec+ keeps surprising the market,” said Jorge León, a former Opec employee now at energy consultancy Rystad. “This sends a clear message, for anyone still in doubt, that the group is firmly shifting towards a market share strategy.”
One reason for fast-tracking the production increases is that oil demand is generally stronger during the northern hemisphere summer, due to higher refinery activity and the summer driving season in the US and Europe, analysts said.
In the longer term the increase in production threatens to add to what most traders expect to be a significant supply surplus by the end of the year that may push prices to below $60 a barrel.
Brent crude, the global benchmark, was priced at $68 a barrel at the close of trading on Friday.
Opec+ members and people familiar with the group’s thinking have offered a range of explanations for the group’s commitment to restoring the idled supply, despite the negative impact on prices. Most agree that the rapid unwinding has been driven in large part by Saudi energy minister Abdulaziz bin Salman, who believed that the burden of the cuts was not being shared equitably.
Saudi Arabia was shouldering the largest share of the cuts while other Opec+ members were consistently producing above their quotas, thereby reducing the overall impact of the effort. By April Saudi Arabia had reduced its output by one-fifth over the previous three years to about 9mn b/d, the lowest since 2011 except during the coronavirus pandemic.
Saudi Arabia has sought to restore discipline by agreeing new plans to compensate for overproduction, but some Opec members, in particular Kazakhstan, appear to have ignored those directives and continued to pump oil in excess of their quotas.
As the cuts were no longer supporting prices, holding back supply no longer made sense for Saudi Arabia and other major producers such as the UAE, analysts said.
In a dual victory for the cartel, allowing output to rise and prices to fall has also helped curry favour with US President Donald Trump, who has repeatedly called for cheaper oil, while hurting US shale producers, which generally need higher prices to break even.
The next question for the oil market is whether the group will move to unwind a second set of voluntary cuts, representing 1.65mn b/d of idle capacity, which are due to remain in place until the end of 2026, Rystad’s León said.
“Two big questions now hang over the market,” he said. “Will Opec+ target the next tier [of cuts] . . . and is there enough demand to absorb it?”