By Dilin Wu, Research Strategist at Pepperstone
Led by Saudi Arabia, OPEC+ has agreed to increase production by 137,000 barrels per day next month. Since the market largely anticipated this move, the “news effect” actually pushed crude higher in early trading. That said, the long-term price pressure from rising supply remains a key concern.
Since April, their cumulative output increases have already surpassed the 2.2 million barrels per day of voluntary cuts announced in July 2023 – achieved a full year ahead of schedule. This highlights a strategic shift: OPEC+ is now focused on defending market share rather than supporting prices, keeping upward pressure in check.
Another key factor is the balance between the US, Russia, and India. So far, India has held off US pressure, with its refineries continuing to buy Russian crude at a steady pace. But the long-term impact of the 50% tariff can’t be ignored. Beyond the strain on Russian crude buyers, geopolitical tensions have pushed Russian refinery throughput to near its lowest level in three years, with more planned maintenance coming up. The crude that can’t be processed domestically is likely to be exported overseas, adding further pressure to prices.
Time is on the side of the bears. In the near term, however, OPEC+ may still struggle to fully meet its production targets due to compensatory cuts, inconsistent compliance among members, and capacity limits. At the same time, geopolitical risks in the Middle East continue to cloud the outlook.