Opec+ agrees bigger-than-expected monthly oil output increase

Group led by Saudi Arabia and Russia to raise crude production by 548,000 barrels per day in August

The Opec+ decision comes despite oil prices languishing far below the highs after the start the Ukraine war in 2022. EPA

Opec+ has agreed to a larger-than-anticipated increase in its monthly oil output, by 548,000 barrels per day, for August.

The decision comes despite demand concerns stemming from America's push for tariffs and the slowing global economy.

The decision marks the fifth consecutive month that the group of oil producers, led by Saudi Arabia and Russia, will raise production.

However, the latest increase is a jump from the 411,000 barrels per day for each of May, June and July and traders had expected the same level for August. The group had approved an increase of 138,000 barrels per day in April.

The increase comes “in view of a steady global economic outlook and current healthy market fundamentals, as reflected in the low oil inventories, and in accordance with the decision agreed upon on 5 December, 2024 to start a gradual and flexible return of the 2.2 million barrels per day voluntary adjustments starting from 1 April, 2025,” Opec said in a statement on Saturday.

Opec+ said the gradual increases may be paused or reversed subject to evolving market conditions and this flexibility will allow the group to continue to “support oil market stability”.

The measure will allow the eight countries of Opec+ to “accelerate their compensation”, the statement said.

The group will meet next on August 3 to decide on September production levels.

“While the unwind of the production cut was a bit larger than expected, it was driven by still low inventories and a healthy oil market,” Giovanni Staunovo, a strategist at Swiss bank UBS, told The National.

“The effective production increase will be considerably lower as some member states are still overproducing while other implement compensation cuts.

“Several market indicators continue to suggest the oil market remains tight, implying additional barrels should be able to be absorbed for now.”

The Opec+ decision comes despite oil prices languishing far below the highs of the initial days of the Russia-Ukraine war in 2022.

Oil prices started 2025 strongly. The closing price of Brent, the benchmark for two thirds of the world's oil, peaked at more than $82 a barrel on January 15, while West Texas Intermediate, the gauge that tracks US crude, hit almost $79 per barrel on that day.

Demand concerns, a slowing economy and less-than-stellar growth in China, the world's biggest crude importer, have weighed down crude prices in 2025.

US President Donald Trump’s push to impose hefty tariffs on trade partners this year has been the biggest driver of declining prices.

His back-and-forth on trade and tariff policies has added to volatility in a market rattled by geopolitical concerns and wars in the Middle East that have threated to disrupt global crude supplies from the region.

The latest round of volatility was driven by the 12-day war between Israel and Iran prices rose more than 13 per cent in a week, but quickly slumped below where they were before the conflict.

Oil prices rise as Iran suspends co-operation with IAEA

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US-Iran nuclear talks expected to restart in Oslo next week are adding to bearish sentiment in the market.

US news website Axios reported on Thursday that White House envoy Steve Witkoff and Iranian Foreign Minister Abbas Araghchi will be in attendance during the negotiations.

Brent, the benchmark for two thirds of the world's oil, closed 0.73 per cent lower to $68.30 a barrel on Friday, while West Texas Intermediate, the gauge that tracks US crude, closed 0.75 per cent lower at $66.50 a barrel.

Brent settled about 0.8 per cent higher than last Friday's close and WTI was around 1.5 per cent higher.

There is still uncertainty over US tariff policies with the end of a 90-day pause on higher rates set to expire on July 9.

President Trump on Friday said he had signed letters to 12 countries outlining the various tariff levels they would face on goods they export to the US, with offers to be sent on Monday, Reuters reported.

A number of nations are still negotiating trade deals with the US.

Accelerated output

The faster pace of bringing crude back to the market began in March when Opec+ said it would proceed with a “gradual and flexible” unwinding of voluntary production cuts of 2.2 million bpd, starting in April and adding 138,000 bpd per month until September 2026.

The return of production cuts – originally agreed by eight Opec+ members including Saudi Arabia, Russia, the UAE and Iraq in November 2023 – had been pushed back several times amid concerns about growing supply in the market.

However, analysts say the market has priced in the latest increase and crude is less likely to start dipping much below the current levels.

Further oil production hikes “remain on the cards”, as some Opec+ members seek to unwind all of the voluntary cuts by autumn, Michael Brown Market Analyst at Pepperstone, told The National.

“The hike comes as a war for market share continues, with Opec+ for the time being more concerned with winning that battle against US shale, than over propping up prices,” he said.

“Fundamentally, the market remains over supplied, with the demand outlook still downbeat, meaning the path of least resistance likely leads lower for the time being, especially as a line has now been drawn under the distraction of geopolitical risk.”