OPEC+ Ends Production Cuts, Increases Crude Output for First Time in Two Years

From September, daily output to rise by 547,000 barrels

As U.S. and Brazil gain market share

Lifting of production cuts advanced by one year

Concerns arise over possible oil oversupply

"Prices may drop to $60 per barrel"

OPEC+, the coalition comprising the Organization of the Petroleum Exporting Countries (OPEC) and non-OPEC oil producers, has ended its production cuts after nearly two years and has shifted toward increased output. This decision is believed to be influenced by declining market share and concerns about potential disruptions to Russian oil supply. There are forecasts that this production hike could result in market oversupply.

OPEC+ announced on the 3rd (local time) that it had agreed to increase daily crude oil production by 547,000 barrels starting September. In a statement, OPEC+ explained, "We decided to adjust production levels considering the stable global economy and low oil inventories." The decision also included the previously approved additional increase of 300,000 barrels from the United Arab Emirates (UAE).

According to Reuters, with the inclusion of the UAE's increase, the total hike will be about 2.5 million barrels per day. This accounts for roughly 2.4% of global demand. Earlier, in April this year, eight countries raised daily production by 138,000 barrels, then by 411,000 barrels each month from May to July, and by 548,000 barrels in August. Initially, OPEC+ planned to phase out the cuts from April this year through September next year. With this new announcement, the voluntary lifting of production cuts moves a year ahead of schedule.

This output increase involves eight countries, including Saudi Arabia, Russia, Iraq, the UAE, and Kuwait. These eight had implemented voluntary cuts of 2.2 million barrels per day since January last year, citing the rise of electric vehicles and slowing crude demand. But in December, they announced they would gradually ease these cuts. This was driven by both pressure from U.S. President Donald Trump, who blamed production cuts for heating up inflation, and their shrinking market share. The Financial Times (FT) noted, "Despite the cuts, oil prices continued to fall, and rising output from the U.S. and Brazil began eroding OPEC's market share."

Separately, these eight countries are still maintaining the additional reduction of 1.65 million barrels implemented two years ago. This measure is scheduled to remain in place until the end of 2026. At the meeting, member states said, "The phased reduction of extra cuts may be paused or withdrawn based on market conditions." The next meeting is slated for September 7.

Some analysts warn that OPEC+ may have to reconsider another round of output cuts, triggered by fears of a supply glut this winter. The International Energy Agency (IEA) forecasts daily oversupply could reach 2 million barrels in the fourth quarter of this year due to China’s economic slowdown and increased output from the Americas. Bloomberg News reported, "Experts from Goldman Sachs and JPMorgan Chase expect crude futures, after dropping 6.7% this year, to fall to around $60 a barrel by year-end." Following OPEC+'s announcement, the global oil price dipped slightly.

However, President Trump's tariff threats against Russia remain a wildcard. He recently announced plans to impose secondary tariffs on countries importing Russian oil if Russia does not agree to a ceasefire with Ukraine.

Reporter: Myung Hyun Han wise@hankyung.com