Oil prices dip as OPEC+ announces fresh output hike for September

SINGAPORE: Oil prices edged lower in early Asian trading on Monday after OPEC+ announced a significant boost in production for September, signalling a shift in strategy as the group tries to reclaim global market share.

By 2218 GMT, Brent crude had slipped by 43 cents, or 0.62 percent, to $69.24 a barrel. Meanwhile, US West Texas Intermediate (WTI) was down 39 cents, or 0.58 percent, trading at $66.94. Both benchmarks had already shed around $2 a barrel on Friday.

The dip followed OPEC+’s decision on Sunday to raise output by 547,000 barrels per day next month. It’s part of a broader trend of stepped-up production from the oil cartel and its allies, as the group gradually reverses the historic supply cuts it made during the pandemic.

Race to regain market share

This latest increase essentially completes OPEC+’s rollback of its biggest production cuts and includes a special bump in output for the United Arab Emirates. The full reversal now accounts for around 2.5 million barrels per day, about 2.4 percent of global oil demand.

According to CNBC, the decision came after a short virtual meeting between eight OPEC+ members, held amid rising US pressure on India to curb imports of Russian oil. The move is part of Washington’s push to bring Moscow to the negotiating table over the war in Ukraine. US President Donald Trump said he wants a peace deal framework in place by August 8.

In a statement, the group said the decision was driven by “robust economic activity and historically low oil inventories”. Analysts say the current oil price hovering around $70 per barrel likely gave the bloc confidence.

“Given fairly strong oil prices at around $70, it does give OPEC+ some confidence about market fundamentals,” said Amrita Sen, co-founder of consultancy Energy Aspects. She added that stockpiles remain tight, which is keeping the market balanced despite increased output.

More cuts could return in September

While output is rising now, OPEC+ may still walk back some of its gains later this year. Two sources within the group said another meeting is set for September 7, where members might reintroduce cuts of up to 1.65 million barrels per day, a measure currently in place until the end of next year.

OPEC+, which includes 10 non-OPEC producers such as Russia and Kazakhstan, controls roughly half of the world’s oil supply. The alliance had been reducing output for several years to support prices but pivoted earlier this year to ramp up production, partly in response to Trump’s repeated calls to ease energy costs.

Since April, the eight core members have steadily raised output: starting with 138,000 barrels per day, then jumping to over 400,000 barrels per day in the following months. The latest increase brings September’s planned rise to 547,000 barrels per day.

“The market has so far managed to absorb these extra barrels quite well, partly thanks to stockpiling in China,” said Giovanni Staunovo of UBS. “Attention will now shift to Trump’s expected announcement on Russia this Friday.”

Challenges ahead for OPEC+

Besides the voluntary 1.65 million bpd cut from the eight members, there’s still a wider 2-million-bpd cut in place across the entire OPEC+ group, set to expire at the end of 2026.

“OPEC+ has passed the first test,” said Jorge Leon, a former OPEC official now with Rystad Energy. “But the next challenge will be even tougher, deciding how and when to unwind the remaining 1.66 million barrels while managing geopolitical friction and keeping the group united.”

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