Saudi Arabia, Russia, and six other key members of the OPEC+ group have announced rising oil production by 548,000 barrels per day (bpd) in August, more than what analysts had predicted. Experts were expecting the group to stick to an increase of 411,000 bpd, which had been the monthly target for May, June and July. But the alliance said in a statement that the decision for a bigger hike was due to “a steady global economic outlook and current healthy market fundamentals, as reflected in the low oil inventories.” Jorge Leon from Rystad Energy told AFP, “OPEC+ keeps surprising the market — this latest hike was even larger than expected and sends a clear message, for anyone still in doubt: the group is firmly shifting toward a market share strategy.”Leon further said that two big questions remain: first, after the full 2.2 million barrels per day of voluntary cuts are rolled back, will OPEC+ move to unwind the next tier of 1.66 million barrels. Aditionally, will there be enough demand in the market to absorb that additional supply? “With prices holding comfortably above $60 and a turbulent geopolitical backdrop — especially given the fragile ceasefire in the Middle East, and broader risks in Ukraine and Libya — the answer to both questions might well be ‘yes’.” Another analyst, Giovanni Staunovo, from UBS added, “Effectively Kazakhstan and Iraq still overproducing their higher quotas is a factor supporting the cut unwind decision.” The decision follows a tense 12-day conflict between Iran and Israel, which briefly pushed oil prices above $80 per barrel due to fears over a possible closure of the Strait of Hormuz, a crucial route for about 20% of global oil. OPEC+, made up of the 12 members of OPEC and its allies, had been cutting production since 2022 to support prices. But in a surprising shift, eight countries led by Saudi Arabia began raising output in May, causing oil prices to fall. Prices have since hovered between $65 and $70 per barrel. An estimate by Bloomberg suggested that despite doubling production targets, the group only increased output by 200,000 bpd in May. This fresh hike could be Saudi Arabia’s way of putting pressure on members who have not stuck to their agreed quotas, by reducing the profits they can make from oil.
