OPEC+ Agrees To Big Output Hike As Focus Shifts To Its Next Move

OPEC+ will sharply hike production again in September to finish unwinding its latest tranche of supply cuts in a push for market share, but left a question mark hanging over its future options as global markets face a mounting surplus.

Saudi Arabia and its partners agreed on a video conference to add 547,000 barrels a day next month. This completes the accelerated reversal of a 2.2 million-barrel cutback made by eight members in 2023, and also includes an extra allowance being phased in by the United Arab Emirates. 

The latest hike caps a dramatic shift from the Organization of the Petroleum Exporting Countries and its partners, from defending prices to opening the taps. Their pivot has helped cap oil and gasoline futures amid geopolitical tensions and strong seasonal demand, offering some relief for drivers and a win for US President Donald Trump. But the added barrels are hitting a market that is already heading toward a sizable surplus. 

OPEC+ will keep its options open regarding another layer of halted output, amounting to about 1.66 million barrels, which currently expires at the end of 2026, three of the delegates said. Its revival will depend on the health of market fundamentals, they emphasized, with one adding the possibility of a review later this year. The eight nations scheduled a follow-up meeting for Sept. 7.

The brevity of Sunday’s call, at just 16 minutes, illustrates that the alliance is united in its strategy, a senior OPEC delegate said. The coalition retains the flexibility to meet at any time, to pause supply increases or even reverse the ones recently agreed, they added. 

"What many feared would crash prices and test internal cohesion has so far been a smooth and orderly return," said Jorge Leon, an analyst at Rystad Energy A/S who previously worked at the OPEC secretariat. "But the group is still threading a fine needle. Will it move to unwind the remaining 1.66 million barrels per day to defend market share?"

Sunday’s decision, confirming an agreement in principle first reported on Saturday by Bloomberg, also comes as Trump intensifies diplomatic pressure on OPEC+ co-leader Russia. The president has threatened Moscow with secondary tariffs on its oil customers unless there is a swift ceasefire in the war in Ukraine.

A disruption to Russian flows would threaten to drive up crude prices and run counter to Trump’s repeated call for cheaper oil, as he pushes the Federal Reserve to lower interest rates.

Russia’s Deputy Prime Minister Alexander Novak made a rare visit to Riyadh on Thursday to discuss "cooperation between the countries" with Saudi Arabian Energy Minister Prince Abdulaziz bin Salman. The two countries have jointly led OPEC+ since its creation almost a decade ago.

The meeting was intended for Saudi Arabia to show unity with Russia and bridge any gaps in their points of view ahead of the meeting, one of the delegates said. 

OPEC+ sent oil prices crashing to a four-year low in early April when it announced a sudden acceleration in its plan to unwind the current tranche of cuts, with markets still reeling in the wake of Trump’s dramatic “Liberation Day” tariff announcements. 

The alliance has followed with a series of bumper monthly increases, and sped up even further in July as it sought to capitalize on strong summer demand. Bloomberg reported at the time that the group had a provisional plan to complete the current supply revival with the September hike.

The latest decision was taken “in view of a steady global economic outlook and current healthy market fundamentals, as reflected in the low oil inventories,” OPEC said in a statement on Sunday.

Crude prices have clawed back losses in recent months, with Brent futures in London trading just below $70 a barrel on Friday — down 6.7% this year. 

The market’s resilience was partly driven by the fact that OPEC+ supply increases — at least in their initial stages — fell short of the amounts promised, as the Saudis pushed countries that had previously over-produced to forgo their allotted hikes in compensation. 

However, analysts have warned the market faces a mounting surplus later this year, when seasonal consumption weakens and as supplies increase and slowing global growth weighs on demand. 

World oil markets face a surplus of 2 million barrels a day in the fourth quarter as Chinese consumption cools and new supplies swell in the US, Canada, Brazil and Guyana, according to the International Energy Agency in Paris. Forecasters on Wall Street, including JPMorgan Chase & Co. and Goldman Sachs Group Inc., expect prices will sink towards $60 a barrel by the end of the year.  

OPEC+ officials have offered a range of explanations for the accelerated supply revival, from punishing the group’s over-producing members to placating Trump.

People familiar with the matter have said Saudi Arabia’s main objective is to recoup the market share OPEC+ has ceded to rivals like US shale drillers during years of output cutbacks. Riyadh’s OPEC+ quota for August, at 9.756 million barrels a day, would roughly put its production at the highest level in two years.

The pivot in oil strategy by Saudi Arabia and its partners, which had spent much of the past decade laboring to shore up crude prices, has also come at a cost for the cartel. Downward pressure on prices stands to widen an already-soaring budget deficit in the kingdom, which needs oil above $90 a barrel to cover government spending, the International Monetary Fund estimates.