Eight members of the Organisation of the Petroleum Exporting Countries (OPEC) and its allies (OPEC+) announced on Saturday, May 3, a significant increase in oil production for June, despite the risk of further depressing already low global prices.
According to an OPEC+ statement, Saudi Arabia, Russia, and six other nations will collectively raise output by 411,000 barrels per day, maintaining the same pace as in May.
This marks a sharp departure from the group’s earlier plan, which projected a more modest increase of just 137,000 barrels.
The 22-member coalition, largely comprised of oil-dependent economies, had previously curbed supply to artificially tighten the market and prop up prices, holding substantial reserves off the market.
“OPEC+ has just thrown a bombshell at the oil market,” Jorge Leon, analyst with Rystad Energy said.
“Last month’s decision was a wake-up call. Today’s decision is a definitive message that the Saudi-led group is changing strategy and pursuing market share after years of cutting production,” he added.
The policy reversal could also pave the way for improved relations with the United States (U.S) under President Donald Trump.
Upon taking office in January, Trump urged Saudi Arabia, the leading member of OPEC, to ramp up oil production to help lower global prices.
Last month, OPEC revised its oil demand growth forecast downward, attributing the adjustment to the negative impact of U.S. tariffs on the global economy.
To bolster its influence on the global oil market, OPEC formed the OPEC+ alliance in 2016, bringing in additional producers.
Eight countries, Saudi Arabia, Russia, Iraq, the United Arab Emirates, Kuwait, Kazakhstan, Algeria, and Oman, have now committed to further increasing output under the new agreement.
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