Eight influential members of the OPEC+ alliance, including Saudi Arabia and Russia, have jointly agreed to boost their oil production quotas by 137,000 barrels per day starting in November. This decision marks their continued effort to capture a larger share of the global oil market.
The group announced this ‘production adjustment’ after an online meeting, citing a stable global economic forecast and robust market fundamentals, particularly the current low levels of oil inventories.
Analysts had anticipated a larger increase, but the cartel opted for a more conservative approach. Their aim is to prevent putting undue pressure on oil prices, especially given the existing weak demand.
According to Jorge Leon, an analyst at Rystad Energy, OPEC+ ‘stepped carefully’ because the market had grown anxious over rumors of a potential 500,000 barrels per day production hike.
Leon further noted that the alliance is skillfully navigating a delicate balance: striving to maintain market stability while simultaneously reclaiming market share in an environment where supply could easily outweigh demand.
It’s worth noting that in recent months, these eight nations—Saudi Arabia, Russia, Iraq, the United Arab Emirates, Kuwait, Kazakhstan, Oman, and Algeria—have already collectively increased their quotas by over 2.5 million barrels per day.
While earlier in the year OPEC+’s main goal was to keep prices elevated by restricting supply, they shifted their strategy in April. Their current objective is to gain market share from other significant producers, including the United States, Brazil, Canada, Guyana, and Argentina.
These production boosts occur even as the International Energy Agency predicts a more modest rise in oil demand, projecting only a 700,000 barrels per day increase between 2025 and 2026.
OPEC, typically more optimistic in its projections, anticipates global oil demand to grow by 1.3 million barrels per day in 2025 and an additional 1.4 million barrels in 2026.
Last Friday, the price of Brent crude, the international benchmark, dipped below $65 per barrel, marking an approximate 8% drop in just one week. This decline was primarily driven by market anxieties over the cartel’s potential for a substantial production increase.
As the second-largest producer within the cartel, after Saudi Arabia, Russia relies on elevated oil prices to fund its ongoing conflict with Ukraine. However, unlike Riyadh, Russia faces considerable limitations in boosting its output due to economic pressures from the United States and European nations targeting its oil industry.
Mr. Leon assessed that the production increase agreed upon is ‘manageable’ for Russia.
Homayoun Falakshahi, an analyst at Kpler, highlighted that Russia’s current production is approximately 9.25 million barrels per day, with a maximum capacity of 9.45 million barrels. This is a noticeable decrease from its pre-conflict output of roughly 10 million barrels per day.
Since August, an increase in Ukrainian strikes on Russian refineries has led to a rise in Russian crude oil exports, as the refined product cannot be utilized domestically. This situation, according to Arne Lohmann Rasmussen, an analyst at Global Risk Management, has made Russia even more reliant on selling its crude oil to international markets.