Sources say that OPEC+ is set to increase oil production again in August.
Four delegates from OPEC+ said that the world's largest oil producer group, OPEC+ is planning to announce a production increase of 411,000 barrels a day for August in order to regain market shares.
If the agreement is reached, the increase in supply by OPEC+ would be 1.78 million bpd, which is equivalent to more than 1.5% of the global demand. The group hasn't yet increased production to the agreed volumes because some members have been compensating for overproduction while others are taking longer to bring their output online.
After several years of production cuts totaling more than 5,000,000 bpd, the group made a radical policy change this year. Eight members began to reverse their latest output cut of 2,2 million bpd in April, and increased production in May, July and June, despite the additional supply pushing down crude prices.
Changes were made after certain members, like Kazakhstan, exceeded their production targets, angering members who adhered more strictly to the agreed-upon cuts. OPEC, along with its allies, including Russia, collectively known as OPEC+ are also trying to regain market share when rival producers, such as the United States, increased production during the period of cutbacks.
Vladimir Putin, the Russian president, said that OPEC+ projected a rise in global demand, particularly during the summer months, suggesting that the group could continue to increase its output.
The Group of Eight, comprising Saudi Arabia, Russia Kuwait, Iraq, United Arab Emirates, Kazakhstan Oman and Algeria will meet on the 6th July.
Helima Croft, an analyst at RBC Capital Markets and Energy Aspects, expect a 411,000-bpd increase in August.
Richard Bronze, director of geopolitics for Energy Aspects, said: "We think that the group will most likely still proceed with the August accelerated dewinding."
Neither OPEC nor the Saudi authorities responded immediately to comments.
Two anonymous sources who were familiar with OPEC+ talks said that the group could discuss a higher than 411,000 bpd for August. However, it wasn't clear if all members would support such a move.
The possibility of more Iranian supply after the Israel/Iran ceasefire complicates the talks. U.S. president Donald Trump stated on Wednesday that the U.S. has not given up on its maximum pressure against Iran but indicated a possible easing of enforcement to help rebuild the country.
On June 23, oil reached a five-month-high above $81 after the U.S. struck Iran's nuke facilities. However, it fell back to $68 by Friday due to the Israel-Iran truce which reduced tensions and the supply risk. Oil fell to a 4-year low in April, below $60. This was after OPEC+ announced that it would triple its May output increase and Trump's tariffs sparked concerns about the global economy.
OPEC+ produces about half the oil in the world. The OPEC+ 8 have announced or made production increases of 1.37 million bpd or 62% of a 2.2 million bpd reduction they are unwinding.
The UAE also increased output by 300,000. This brings the total increase to 2.5 million BPD. Reporting by Alex Lawler. Olesya Astakhova. Ahmad Ghaddar. Maha El Dahan. Seher Dareen contributed additional reporting. Alex Lawler wrote the article. Simon Webb, Mark Potter and Alex Lawler edited the work.
(source: Reuters)
