OPEC+ Finalizes Major September Supply Hike; 1.66M Barrel Reserve Capacity Hangs Over Market

TradingKey - OPEC+ announced on Sunday that it will significantly increase oil production by 547,000 barrels per day (bpd) in September, marking the full and early reversal of the group's largest production cut plan. This decision comes alongside a separate production increase of approximately 2.5 million bpd from the United Arab Emirates, representing about 2.4% of global demand.

This move continues the gradual production ramp-up trend seen since the beginning of the year, with a 138,000 bpd increase in April and a cumulative 411,000 bpd increase from May through July.

Goldman Sachs analysts estimate that the actual supply increase from the eight OPEC+ countries that have raised output since March will reach 1.7 million bpd—approximately two-thirds of the announced amount—as other group members have already cut production following prior overproduction.

The rationale for this production strategy stems from confidence in global economic health and low levels of global oil inventories.

Recent EU sanctions on Russia, including lowering the crude oil buying cap price and pressuring global buyers to reduce imports, coupled with reports of U.S. requests for countries like India to halt Russian crude purchases, have intensified market concerns about supply disruptions.

“Given fairly strong oil prices at around $70, it does give OPEC+ some confidence about market fundamentals,” said Amrita Sen, co-founder of Energy Aspects, adding that the market structure was also indicating tight stocks.

However, the current focus of the market is on the future production policy direction of OPEC+.

Sources revealed that after a meeting on Sunday, eight member countries involved in the recent production increase plan to hold another meeting on September 7. During this upcoming meeting, they may consider restoring a portion of the previously reduced capacity, which totals approximately 1.66 million barrels per day. This reduction was originally set to last until the end of 2026 under existing cutback plans.

Following this meeting, OPEC+ representatives did not provide any further clarity regarding the future arrangements for this deferred capacity. Officials made it clear that whether or not the alliance will continue to restore this production will depend entirely on market conditions at that time. As a result, speculation and cautious sentiment in the market are expected to persist until the next assessment meeting.

UBS analyst Giovanni Staunovo commented that determining whether and when to release the remaining 1.66 million barrels of oil is becoming increasingly challenging.

Brent crude futures dipped below $70 last Friday and continued declining this week. As of press time, prices stood at $69.51 per barrel, down 0.23%.