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The OPEC+ Oil Cartel agreed to raise production again in October as a group of Saudi-led producers continues its six-month push to recover market share even as global demand weakens.
The decision, set to weigh oil prices, further confirms that Saudi Arabia is focusing on abandoning its pursuit of higher prices and instead increasing revenue by regaining as much production as possible.
Eight members of the group, including Saudi Arabia, Iraq and the United Arab Emirates, said they will increase production by combining 137,000 barrels per day next month. However, analysts said that only Saudi Arabia and the United Arab Emirates could increase supply as most other members have already put in close capacity.
Eight countries have already increased their oil production by around 2.5 million b/d, rapidly solving the first production cut since April. Sunday’s announcement means Sunday’s announcement that it has begun to unravel a second set of production cuts totaling 1.65 million b/d from April 2023.
So far, Saudi Arabia and other OPEC+ members have been able to increase production this year without significantly lowering prices. Brent crude fell 2.2% on Friday at $65.50 per barrel as traders weighed the potential for future OPEC+ increases. However, this rose from the low point in April at $58 per barrel.
Prices are supported by continued sanctions against Russia and Iran and high seasonal demand from the Northern Hemisphere summer travel season. However, most traders were already predicting surplus towards the end of the year.
A total of 2 million b/d, the third production cut shared by all 22 members of the cartel is expected to remain intact until the end of 2026.
The cut, first announced in October 2022, initially helped support prices at a Brent crude price of $101 per barrel in 2022 and $82 per barrel in 2023.
The measure also created internal tensions as the cartel lost market share and produced more than some members were assigned.
Eventually, Saudi Arabia increased its own production by 2mn b/d, but became unhappy with shouldering the biggest share of the cut, and began restoring its output to its members earlier this year.
According to those familiar with Saudi Arabia’s ideas, the political and economic costs of maintaining the cuts have grown too much. By quickly recovering the output, Riyadh can also assess each member’s production capacity to reconsider potential quotas in the future.
Saudi Arabia and the United Arab Emirates are among the countries that continue to invest in the oil sector, but the lack of investment elsewhere is expected to have some members already put their capabilities into play. In future renegotiations, those members will see them
The quota has decreased, people said.
