OPEC+ Production Quotas Fail to Boost Output, Oil Prices Stable

Morgan Stanley has noted a significant gap between the increased oil production quotas set by OPEC+ and the actual output from its member countries. Despite OPEC+ rapidly raising its oil production quotas to restart idle capacity, this increase has not yet translated into a substantial rise in actual production. From March to June, the daily production quota was increased by approximately 100,000 barrels, but this has not resulted in a corresponding increase in actual output.

The discrepancy is particularly notable in Saudi Arabia, the world's largest oil producer. Despite announcing an increase in its production quota, Saudi Arabia has not shown a significant rise in its actual oil production. This situation has led to a stable oil market, with the international benchmark for oil, Brent crude futures, hovering around 66.4 dollars per barrel.

The sudden shift in OPEC+'s strategy is aimed at regaining market share lost to competitors and punishing member countries that have consistently exceeded their production quotas. However, the actual increase in production has been slower than anticipated, which has contributed to the stability of oil prices.

Morgan Stanley's analysis is based on multiple data points, including refinery processing throughput, export shipments, pipeline flows, inventory indicators, and estimates from six institutions on actual production. Despite the current stagnation, there is potential for a significant increase in production in the coming months. Morgan Stanley predicts that from June to September, the core member countries of OPEC+ will increase their oil supply by approximately 42,000 barrels per day, with about half of this increase coming from Saudi Arabia.

The firm maintains a bearish outlook on the overall oil supply, predicting that non-OPEC+ oil supply will increase by approximately 110,000 barrels per day this year, exceeding the expected global demand increase of 80,000 barrels per day. This outlook suggests that even without an increase in OPEC+ production, the oil market could face a supply glut, especially after the seasonal summer demand peak.

The current price of Brent crude oil is 66.45 dollars per barrel, down 11% since the beginning of the year. Morgan Stanley expects the average price for the second half of the year to be around 57.50 dollars per barrel. This outlook is consistent with other major financial institutions, which also predict a significant supply glut in the oil market by 2025 and 2026, leading to a continued decline in oil prices.