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OPEC+, the coalition of major oil-producing countries led by Saudi Arabia and Russia, has announced it will increase oil production by 548,000 barrels per day starting in August. This is part of the group’s ongoing effort to adjust global oil supply in response to rising demand and political pressure, especially from the United States.
This marks the group’s first meeting since oil prices surged and then dipped due to tensions following Israeli and U.S. attacks on Iran. Although OPEC+ has been reducing oil output since 2022 to keep prices stable, it is now gradually reversing those cuts. The shift in strategy is aimed at regaining lost market share and easing gasoline prices that have been high in many countries.
The eight countries contributing to this production boost are Saudi Arabia, Russia, the UAE, Kuwait, Oman, Iraq, Kazakhstan, and Algeria. These nations had already started easing earlier cuts of 2.2 million barrels per day in April, and with the new addition, most of those cuts will now be undone. Only 280,000 barrels per day remain to be restored from that earlier reduction.
This increase for August is notably higher than previous months: May, June, and July each saw smaller hikes of 411,000 barrels per day, and just 138,000 in April. OPEC+ says it feels confident in making this move due to a stable global economy, healthy oil market fundamentals, and relatively low oil stockpiles around the world.
However, tensions have been building within the group. Some countries like Kazakhstan and Iraq have already been producing more than their agreed limits, frustrating other members that were sticking to the rules. Even so, Kazakhstan’s oil output recently returned to record-high levels.
The group’s decision to release more oil also comes as competition from non-OPEC countries like the United States increases. By producing more, OPEC+ hopes to hold onto its influence in the global energy market.
In addition to the 548,000-barrel increase, the UAE has been given special approval to raise its output by another 300,000 barrels per day. Despite all these increases, OPEC+ still has other production cuts in place, totalling 3.66 million barrels per day, which they can adjust in the future depending on market needs.
The next OPEC+ meeting is scheduled for August 3, where the group will evaluate the market again and decide whether to continue increasing output or make other adjustments.
Credits – Reuters