OPEC+ led by Saudi Arabia increases production despite falling oil prices – FT

Eight OPEC+ member states, including Saudi Arabia and Russia, have announced a second consecutive monthly increase in oil production of 411,000 barrels per day in June, despite oil prices continuing to fall due to concerns about oversupply and weak economic activity. This is reported by the Financial Times, writes UNN.

DetailsLast month, the cartel surprised the market by announcing an increase in production by the same amount – more than three times the expected amount. The combination of increased OPEC supply and fears that US trade duties would harm the global economy has led to a nearly 20% drop in the Brent benchmark price since April 2 – to $61 a barrel, close to a four-year low.

“OPEC+’s decision to increase production again against the backdrop of a falling market marks a significant shift in approach,” said Jorge Leon, a former OPEC employee who now works at energy consulting firm Rystad.

“OPEC+ has just dropped a bomb on the oil market,” he said, adding: “Last month’s decision was a wake-up call. Today’s decision is a clear message that the Saudi-led group is changing its strategy and seeking to regain market share after years of production cuts.”

AddendumOver the past three years, OPEC+ has cut combined production by nearly 6 million barrels per day to support prices — a strategy that initially kept oil above $90 a barrel for most of 2022. However, its effectiveness has declined amid weak demand, rising US production and non-compliance with quotas among some member countries.

Tensions within the cartel are rising, especially with Kazakhstan, which has increased production at its Chevron-operated Tengiz field and said it will put “national interests” above group quotas.

In response, Saudi Arabia began rolling back production restrictions, initiating this year’s production increase. The kingdom, which has cut its own production by 2 million barrels per day over the past three years, is increasingly frustrated that it is bearing the brunt of the cuts, while other members, including Kazakhstan and Iraq, are consistently exceeding their quotas.

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Saudi officials are now poised to increase supply, even if it leads to a prolonged period of low prices, according to people familiar with the kingdom’s position. It is unclear why Saudi Arabia, which is struggling to balance its state budget due to low oil prices, has switched to a new strategy that is likely to cause even lower prices by the end of the year.

Some analysts question how much oil will actually hit the market. Bjarne Schieldrop, chief commodities analyst at SEB, noted that OPEC+ production fell by 200,000 barrels per day in April due to sanctions against Venezuela, and said the planned increase may not materialize if countries that previously violated quotas — such as Kazakhstan, Iraq and the UAE — cut production.

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