Filenews 31 May 2025
The OPEC+ alliance is considering further accelerating oil production growth by considering a boost of more than 411,000 barrels per day for July, according to sources familiar with the consultations. The move is part of a broader effort to regain lost market share.
Eight key OPEC+ members led by Saudi Arabia are scheduled to hold a video conference on Saturday to determine the new exit strategy. The group's two previous meetings had resulted in unusually large increases in production, which contributed to lower prices, and now an even more aggressive step is not ruled out.
Some country representatives said they had no official information about an excessive increase and expected a repeat of the already agreed increases of 411,000 barrels per day, as forecast for May and June. However, decisions now seem to be made by a narrower core of powerful members, with the rest being informed at the last minute.
OPEC+'s policy shift from defending prices to deliberately lowering them has been a surprise. In April, the announcement of a three-fold increase in supply caused a shock to the markets. The move came amid slowing demand and then-U.S. President Donald Trump's trade conflict, temporarily pushing prices below $60 a barrel — the lowest level in four years.
On Friday, Brent contracts fell below $64 a barrel in London.
Kazakhstan's Deputy Minister of Energy, Alibek Zamaouf, had already foreshadowed a possible larger increase. "There will be an increase, but whether it will be 400, 500 or 600 thousand barrels, this will be announced on Saturday," he told reporters in Astana.
As for the motivations behind Riyadh's aggressive turn, interpretations vary. Others speak of simply satisfying strong demand, others of punishing members such as Iraq and Kazakhstan who exceed the permitted production limits. Some officials also do not rule out political incentives, such as serving U.S. pressure or reclaiming the market from competitive U.S. shale oil production.
If Saudi Arabia's goal is to discipline offenders through "controlled pressure," the tactic seems to be failing. Kazakhstan, the biggest offender, continues to overproduce by several hundred thousand barrels a day and openly declares that it does not intend to comply. Energy Minister Yerlan Akenzenov said the country could not impose reductions on international companies operating there, nor on state-owned deposits.
This strategy, however, is not without cost. The fall in prices may relieve consumers and central banks struggling with inflation, but it severely hurts producers. According to the International Monetary Fund, Saudi Arabia needs prices above $90 to cover Crown Prince Mohammed bin Salman's ambitious spending plans. The country is facing a growing budget deficit and is being forced to reduce investment in iconic projects, such as the futuristic city of Neom.
