OPEC+ Agrees to 41.1 Thousand Barrels Daily Increase, Saudi Arabia Drives Market Share Gain

OPEC+ is anticipated to reach an agreement on a fourth round of significant oil production increases this weekend. Eight major member countries are planning to increase daily production by 41.1 thousand barrels starting in August. This move is driven by Saudi Arabia's efforts to regain market share. According to reports from last week's meeting, representatives from the eight core member countries are discussing the plan, which is likely to be approved during a video conference on Sunday. The majority of the 32 traders and analysts surveyed anticipate that the plan will be endorsed, reflecting the organization's strategy to increase market share.

The anticipated increase in oil production by OPEC+ is likely to put further downward pressure on oil prices. This is the fourth consecutive month that the organization, led by Saudi Arabia, is planning to raise supply levels. The move comes as the global oil market continues to face challenges, with demand remaining uncertain and supply increasing. The decision to increase production is seen as a way for OPEC+ to maintain its market share in the face of growing competition from other oil-producing regions.

The increase in production is expected to add to the existing supply glut in the market, which has been a major factor in the recent decline in oil prices. The additional 41.1 thousand barrels per day will further increase the supply, potentially leading to a further drop in prices. This is likely to be a concern for oil-producing countries that rely on high oil prices to support their economies. However, for consumers, the increase in supply could lead to lower prices at the pump, providing some relief from high fuel costs.

The decision to increase production is also seen as a response to the recent decline in oil prices, which have fallen due to concerns about the global economic outlook and the impact of the COVID-19 pandemic on demand. By increasing supply, OPEC+ is hoping to stabilize prices and prevent a further decline. However, the move is also seen as a way for the organization to maintain its market share in the face of growing competition from other oil-producing regions.

OPEC+ has already agreed to restore about two-thirds of the 2.2 million barrels per day reduction implemented in 2023. A few more rounds of production increases will complete this process, after which the organization will consider lifting further supply restrictions. However, the actual increase in production so far has been lower than the promised amount, partly due to some member countries (such as Iraq and Russia) forgoing their allowed production increases to make up for previous overproduction. In May, these eight countries collectively increased production by 15.4 thousand barrels, while the total allowed increase was 41.1 thousand barrels.

Kazakhstan has been one of the most significant offenders, consistently exceeding its production limit by hundreds of thousands of barrels per day, which has frustrated Saudi Arabia. The country has limited control over international companies expanding their production capacity and has made little effort to curb this expansion. The further increase in production by OPEC+ is expected to put additional downward pressure on oil prices and increase the financial burden on member countries. The organization's strategy of prioritizing market share over price stability has been criticized by some analysts, who argue that this approach could lead to a prolonged period of low oil prices.

Despite the potential risks, OPEC+ appears committed to its strategy of increasing market share. The organization's decision to prioritize production over price stability is seen as a response to the growing competition from other oil-producing regions, as well as the need to satisfy increasing demand. However, the long-term impact of this strategy remains uncertain, as it will depend on a range of factors, including global demand for oil, the actions of other oil-producing countries, and the overall health of the global economy.