Opec+ has agreed to increase its oil production again in October, as the alliance of oil producers led by Saudi Arabia and Russia seeks to regain market share.
The group, citing steady global economic outlook and current healthy market fundamentals, approved adding about 137,000 barrels per day, on Sunday, marking the return of 1.66 million barrels a day of cuts, in a move that will intensify the pressure on member nations that rely on higher prices.
"In view of a steady global economic outlook and current healthy market fundamentals, as reflected in the low oil inventories, the eight participating countries decided to implement a production adjustment of 137,000 barrels per day from the 1.65 million barrels per day additional voluntary adjustments announced in April 2023," the Organisation of the Petroleum Exporting Countries (Opec) said in a statement.
"This adjustment will be implemented in October 2025."
The eight Opec+ countries, which previously announced additional voluntary adjustments in April and November 2023, namely Saudi Arabia, Russia, Iraq, UAE, Kuwait, Kazakhstan, Algeria, and Oman met virtually on Sunday to review global market conditions and outlook.
The eight countries will meet next on October 5.
"The 1.65 million barrels per day may be returned in part or in full subject to evolving market conditions and in a gradual manner. The countries will continue to closely monitor and assess market conditions," Opec+ said.
The eight Opec+ countries also noted that this measure will provide an opportunity for the participating countries to accelerate their compensation.
The move comes after the group agreed in August to increase oil production by 547,000 bpd for September, following a larger-than-expected increase of 548,000 bpd rise in August and 411,000 bpd in May, June and July, accelerating the pace of its phased supply return.
"With inventories in check in the OECD and the oil curve still in backwardation, signalling some form of near-term market tightness, the group believes it can continue to unwind their cuts," Giovanni Staunovo, a strategist at Swiss bank UBS, told The National.
"Similar to the past, I expect the effective production increase to lag the quota increase."
Last week, US government data showed America’s crude inventories had grown by 2.4 million barrels, contrary to analyst expectations of a decline.
Oil prices this week recorded a weekly decline over concerns of a supply glut stemming from higher US crude inventories and another output increase from Opec+.
Brent, the benchmark for two thirds of the world's oil, settled 2.2 per cent lower at $65.50 a barrel on Friday. West Texas Intermediate, the gauge that tracks US crude, declined 2.5 per cent to $61.87.
Oil prices rose at the start of the week amid fears that continued hostilities between Russia and Ukraine could disrupt supplies and as certain shipping companies linked to Iran faced US sanctions.
Crude prices have fallen 12 per cent this year, owing to US President Donald Trump’s trade war weighing on demand and as they come under pressure by rising supply from Opec+ countries and elsewhere.
US shale revolution
Lower oil prices have also hit US companies hard. On Wednesday, ConocoPhillips said it planned to reduce its workforce by 20 per cent to 25 per cent, becoming the latest major oil producer to announce large layoffs.
US shale companies have said they need oil prices to average $65 per barrel to drill profitably, according to a quarterly survey from the Federal Reserve Bank of Dallas, published in March. The Trump administration has repeatedly said it wants oil to be at $50 per barrel, to maintain profits for US companies while also keeping fuel affordable for Americans.
Meanwhile, last week, US Energy Secretary Chris Wright credited the country's shale revolution for keeping the market resilient during the 12-day conflict between Israel and Iran in June.
“We showed that we're … much more resilient than we were in the 1970s to [shocks on] oil prices,” he said during a moderated discussion at the Council on Foreign Relations in Washington.
“We need oil production all around the world, but the US being by far the largest producer … has been a stabiliser on oil prices.”
Global oil prices soared after Israel struck Iran on June 13, a significant escalation of regional tension, with the benchmark Brent crude rising more than 10 per cent before settling around $74 a barrel.
Increased pressure
The latest decision by Opec+ will put increased pressure on member nations that rely on higher prices, especially those that cannot increase production, according to the International Energy Agency.
“The group’s decision to start unwinding its next layer of cuts also reflects a tension that has dominated oil markets for months: forecasters are issuing mounting warnings about a looming supply surplus, and yet markets have remained relatively tight over the Northern Hemisphere summer,” the Paris-based agency said.
Iraq's Prime Minister Mohammed Shia Al Sudani urged Opec on Saturday to reconsider its approved export quote for his country as it did not align with its vast oil reserves, production capacity, population, and its overall financial needs.
“We hope that our brothers and friends will understand the developmental and economic necessities of Iraq and reconsider our quote based on indicators of our real oil capabilities,” he said at the opening of the Baghdad International Energy Forum.
Long-term view
For global oil markets in the longer term, the move serves to “erode a long-standing safety net of idle production that could be brought back to cushion unforeseen supply shocks”.
This is due to Iraq's need for increased revenue to support reconstruction after being ravaged by war, he added.
The IEA has also raised its forecast for oil supply growth this year after a decision by Opec+ to increase production and has lowered its demand forecast due to lacklustre demand across the major economies.
The energy agency expects world oil supply growth to be 2.5 million bpd this year before slowing to 1.9 million bpd in 2026. World oil demand will rise by 680,000 bpd this year, down from the 700,000 bpd previously forecast, it said.
Meanwhile, last month, the broader Opec group increased its global oil demand forecast for 2026 slightly, expecting a tighter market amid economic momentum that is expected to continue next year. Demand for crude is expected to grow by 100,000 bpd to 1.4 million bpd, with a slower expansion in supplies from Opec’s rivals.
