- OPEC+ plans to fully unwind its 2.2 million bpd production cuts by September, much faster than originally scheduled.
- The group’s surprise production increases aim to regain market share and align with U.S. calls for lower energy prices.
- Analysts warn of potential oil oversupply and declining U.S. shale production if oil prices remain at or below $60 per barrel.
The eight OPEC+ producers withholding supply to the market are set to complete the unwinding of their 2.2 million barrels per day (bpd) production cuts from 2023 with another supersized output hike of 550,000 bpd for September, five sources with knowledge of the alliance’s discussions told Reuters on Monday.
Since starting to unwind the cuts earlier this year, OPEC+ producers Saudi Arabia, Russia, Iraq, UAE, Kuwait, Kazakhstan, Algeria, and Oman made a small output increase of 138,000 bpd in April and then began to aggressively raise production quotas by 411,000 bpd for each of May, June, and July.
At this weekend’s meeting, the OPEC+ group caught the market by surprise – once again – by announcing a larger-than-expected output hike of 548,000 bpd for August. This exceeded market expectations of another routine 411,000 bpd hike, while the move set the alliance on track to fully unwind 2.2 million bpd cuts nearly a year ahead of schedule.
Another production boost of 550,000 bpd for September would allow OPEC+ to unwind all the 2.2 million bpd cuts, as well as complete the 300,000 bpd output increase from the UAE as the Gulf producer last year argued for and received a higher quota due to the ramp-up of its production capacity.
OPEC+ has an additional 3.6 million bpd in active cuts spread across members, including voluntary reductions from major producers. These expire at the end of 2026.
However, with a market glut expected after the peak summer season, oil prices are likely to remain depressed, analysts say. This is not good news for U.S. shale producers, the majority of which said in the latest Dallas Fed Energy Survey out last week that their oil production would decrease slightly from June 2025 to June 2026 if the WTI price remained at $60 per barrel.
At WTI prices at $50 per barrel, 46 percent of executives expect their firms’ oil production would decrease significantly from June 2025 to June 2026, and another 42 percent anticipate their firms’ oil production would decrease slightly. The most selected response among executives at large E&P firms was “decrease slightly,” while among executives at small E&P firms it was “decrease significantly.”
Credit: Oilprice.com
