OPEC+ agreed on another record increase in oil production for September, completing its current section of supply reactivation a year earlier, and indicated that I might consider checking the next layer of cuts.
Saudi Arabia and its partners agreed to add 547,000 barrels per month. This completes the reversal of a trace of 2.2 million barrels made by eight members in 2023, and also includes an additional allocation that is being gradually implemented by the United Arab Emirates. The call lasted only 16 minutes, according to one of the delegates.
The group will keep its options open to reassess the plans for another section of approximately 1.66 million barrels of suspended production, three delegates said, but emphasized that no decision has been made and that any decision will depend on the market situation. They have scheduled a follow -up meeting for September 7.
The last increase culminates a drastic change in the organization of oil export countries and its partners, which went from defending prices to open the tap to recover market share. This change has helped stop oil and gasoline futures against geopolitical tensions and strong seasonal demand, which has meant a relief for drivers and a victory for US President Donald Trump. However, accelerated increases are feeding the expectations of a world supply surplus later in the year.
The brevity of Sunday’s call demonstrated the strategic unit of the group, said a high OPEC delegate. The alliance maintains flexibility to meet at any time and also has the ability to pause increases or reduce production if the market requires itthey added.
“What many feared would collapse prices and test internal cohesion has so far been a fluid and tidy return,” said Jorge León, an analysis of Rystad Energy A/O, who previously worked in the OPEC Secretariat. “But the group is still looking for solutions. Will you take measures to dismantle 1.66 million barrels remaining daily to defend your market share? “
Sunday’s decision, which confirms a principle agreement initially informed by Bloomberg on Saturday, coincides with the intensification of President Trump’s diplomatic pressure on Russia, OPEC+collide. Trump has threatened Moscow with tariffs secondary to his oil clients unless a rapid fire occurs in the war in Ukraine.
An interruption in Russian flows would threaten to raise crude oil prices and contradict Trump’s repeated order of cheaper oil, while Press the Federal Reserve to lower interest rates.
The Vice Primer Russian Minister, Alexander Novak, made an unusual visit to Riad on Thursday to address cooperation between countries with the Minister of Energy of Saudi Arabia, Prince Abdulaziz Bin Salman. Both countries have jointly led OPEC+ since its creation almost a decade ago.
Price drop
OPEC+ made oil prices fall to a minimum of four years in early April when it announced a sudden acceleration in its plan to undo the current section of cuts, with The markets still staggering after the dramatic tariff announcements of Trump’s “Day of Liberation”.
The Alliance has continued with a series of important monthly increases, and has accelerated them even more in July, seeking to take advantage of the strong summer demand. Bloomberg then reported that the group had a provisional plan to complete the current recovery of the offer with the September increase.
The last decision was made “in view of a stable global economic perspective and the current healthy foundations of the market, as reflected in the low oil inventories,” OPEC said in a statement on Sunday.
Crude oil prices have regained losses in recent months, with Brent futures in London quoting just below US $ 70 per barrel on Friday, 6.7% less so far this year. However, analysts warn that the market faces a growing surplus at the end of this year, as the supply and deceleration of worldwide growth increases the demand. The reference prices of retail gasoline in the US even dropped slightly last month.
OPEC+ officials have offered a series of explanations for the accelerated reactivation of the supply, from punishing group members overproduction to Trump.
People familiar with the matter have affirmed that the main objective of Saudi Arabia is to recover the market share that OPEP+ has yielded to rivals as US gas extraction companies of shale gas for years of production cuts. The Riad fee in the OPEC+ for August, of 9,756 million barrels per day, would place its production at its highest level in two years.
The change of oil strategy of Saudi Arabia and its partners, which had passed much of the last decade working to underpin the prices of crude oil, has also had a cost for the cartel.
The downward pressure on prices could aggravate a budget deficit already raised in the kingdom, which has been forced to drastically cut the investment in large key projects for the bold economic transformation plans of the heir prince Mohammed Bin Salman. Saudi need a price of oil exceeding US $ 90 per barrel to cover public spendingaccording to estimates of the International Monetary Fund.
Even so, oil prices have been constantly recovered since the minimum of April, even while the alliance accelerates the recovery of the supply, a process that most oil analysts assumed that it would be impossible this year. Market recovery is reducing the financial impact for crude oil exporting countries.
The market resilience was partly due to the supply increases of the OPEC+, at least in its initial stages, did not reach the promised amounts, since the Saudi pressed the countries that had previously produced in Excess to give up the increases assigned in compensation.
Crude oil has been driven by a series of factors, from a resilient demand and a shortage of diesel fuel to the conflict between Israel and Iran and a weaker dollar.
However, Petroleum merchants doubt that the strength of prices endures. The world oil markets face a surplus of 2 million barrels per day in the fourth quarter, as Chinese consumption slows down and the offer increases in the United States, Canada, Brazil and Guyana, according to the International Energy Agency in Paris.
Wall Street analysts, including JPMorgan Chase & Co. and Goldman Sachup Group Inc., expect prices to collapse around US $ 60 per barrel for the end of the year. The FGE consultancy even estimates that OPEC+ will have to reverse its recent increases and resume cuts.
