LONDON/MOSCOW, Oct 5 (Reuters) - In a recent announcement, OPEC+ has confirmed plans to increase oil output starting in November by 137,000 barrels per day (bpd). This decision mirrors the modest monthly increase implemented in October, driven by ongoing concerns regarding a potential supply glut in the oil market. The OPEC+ group, which includes the Organization of the Petroleum Exporting Countries along with Russia and several smaller producers, has ramped up its oil output targets by over 2.7 million bpd this year, a move that represents approximately 2.5% of global oil demand.
The recent shift in OPEC+ policy follows years of production cuts and is strategically aimed at reclaiming market share from competitors, particularly U.S. shale producers. As a result of these developments, Brent crude prices plummeted to below $65 per barrel on Friday, as analysts predict a significant supply surplus in the fourth quarter of 2023 and into 2026, primarily due to diminished global demand and increasing supply from the United States. Although current prices remain below this year's highs of $82 per barrel, they are still higher than the $60 per barrel mark observed in May.
Prior to the meeting, there were notable differences in opinion among key members of OPEC+. Russia and Saudi Arabia, the two largest producers within the group, expressed contrasting views regarding the production levels. Sources indicate that Russia advocated for the same modest output increase as in October, aiming to prevent undue pressure on oil prices and citing challenges in raising output due to ongoing sanctions related to its conflict in Ukraine. Conversely, Saudi Arabia was more aggressive in its approach, suggesting increases of double, triple, or even quadruple the proposed figure—ranging from 274,000 bpd to 548,000 bpd. This push from Saudi Arabia is motivated by its desire to rapidly regain market share, leveraging its spare production capacity.
Despite these internal disagreements, OPEC has characterized the global economic outlook as stable, asserting that market fundamentals remain strong, bolstered by low oil inventories. On Sunday, OPEC highlighted that its output cuts reached a peak of 5.85 million bpd back in March, a figure made up of several components: voluntary cuts of 2.2 million bpd, 1.65 million bpd from eight member countries, and an additional 2 million bpd from the entire group. The eight producers are on track to fully reverse one of these cuts—specifically the 2.2 million bpd—by the end of September.
As part of the ongoing adjustments, the group commenced the gradual removal of the second layer of cuts, totaling 1.65 million bpd, with the recent increase of 137,000 bpd for October. The next OPEC+ meeting is scheduled for November 2, where further discussions on production strategy will take place.
Reporting by Alex Lawler, Ahmad Ghaddar, Olesya Astakhova, and Dmitry Zhdannikov; writing by Dmitry Zhdannikov and Alex Lawler; editing by David Goodman.
