The Organisation of Petroleum Exporting Countries (OPEC) says it is streamlining production output to prevent fall in oil prices. The the organisation has continued to return modest volumes of supply to the market through the OPEC+ group to avoid fall oil prices as demand weakens after the summer.
Report says the production hikes are estimated to be lower than the headline figures, with some producers lacking the capacity to boost output further while others are compensating for previous overproduction. This is coming as Russia raised its oil production higher in the OPEC+ deal.
The decision to up Russia’s oil production was announced by Deputy Prime Minister Alexander Novak said last Wednesday. While production increases support oil prices, they also reduce the spare capacity of the OPEC+ producers. Except for Saudi Arabia, the United Arab Emirates (UAE) and Iraq, the other members of the OPEC+ alliance are likely maxed out, leaving the market in a precarious position when the next supply shock occurs.
This could emerge with another flare-up in the Middle East or more sanctions on Russia or Iran. Over the past three years, the OPEC+ cuts, which at one point withheld supply equivalent to about five percent of global consumption, have supported oil prices. However, the spare capacity that the cuts left have also eased fears of shortages during all the Israel-Iran flare-ups since 2023, for example.
However, as OPEC+ proceeds with reversing these cuts, now tapping its last layer of reductions of 1.65 million barrels per day (bpd), the spare capacity in those producers that do have it is shrinking. So is the ability of the market to absorb the next supply shock.
