Saudi Arabia, Russia, and five other key members of OPEC+ agreed during an online meeting to increase oil production by 188,000 barrels per day starting in September. The decision comes against a backdrop of ongoing disruptions caused by the Middle East war.
The seven participating countries, which also include Iraq, Kuwait, Kazakhstan, Algeria, and Oman, confirmed the production adjustment in a joint statement. Analysts widely expected the move, which completes the unwinding of the second of three production-cut packages introduced by the organisation.
Unwinding Voluntary Production Cuts
Between late 2022 and 2023, OPEC+ agreed to cut oil production in three separate rounds, reducing total output by nearly 6 million barrels per day to support falling prices. However, key members changed their strategy by gradually increasing production starting in 2025.
Jorge Leon, an analyst at Rystad Energy, noted that OPEC+ has finished unwinding its voluntary cuts. He stated that the next challenge for the group is managing the surplus that could emerge as export flows normalise.
Leon added that OPEC+ has little incentive to rush into further supply changes now that the restoration campaign is complete. Rystad Energy expects a fourth-quarter pause while the group prepares for the 2027 quota negotiations.
Geopolitical Constraints and Capacity Issues
Despite the agreed increase, the real market impact remains uncertain. Gulf countries have struggled to boost exports due to the near-paralysis of the Strait of Hormuz orchestrated by Iran, despite a brief upswing in shipping traffic after a US-Iran memorandum of understanding was signed in June.
Leon warned that the decision changes little in the near term because the Strait of Hormuz remains constrained. He noted that geopolitics is currently masking the scale of the supply increase, which will become clearer once export flows normalise.
Furthermore, many OPEC+ members cannot produce as much oil as their official targets allow. Giovanni Staunovo, an analyst at UBS, explained that increasing targets has become less meaningful due to a decline in production capacity among some members.
Russia, for instance, is facing repeated Ukrainian drone attacks on its oil infrastructure. This has crimped its production, which currently hovers around 9 million barrels per day compared to its official target of 9.8 million barrels per day.
Future Quota Negotiations and Group Cohesion
While some member countries like Iraq want to significantly boost production, OPEC+ faces potentially difficult talks over new production quotas starting next year, according to analysts at DNB Carnegie.
Group cohesion has also come under scrutiny following the United Arab Emirates' exit from the alliance on May 1. While Leon does not believe cohesion is at risk at this moment, he warned that the UAE's withdrawal highlighted a weakness in this area.
