OPEC+ to raise oil production again in September, ending voluntary curbs from 2023

After OPEC+ countries approved an increase in oil production of 550,000 barrels per day (bpd) from August on Saturday, the same increase is expected to be approved soon for September this year, according to Reuters sources. The organisation, which produces roughly half of the world’s oil, would thus complete the unwinding of voluntary production cuts introduced in recent years.

To support prices after their collapse due to the Covid pandemic, eight countries (Saudi Arabia, Russia, Iraq, the United Arab Emirates, Kuwait, Kazakhstan, Algeria and Oman) voluntarily cut production by 1.65 million bpd in April 2023. This limit was increased to 2.17 million barrels per day in November of the same year.

The current decision to remove quotas more quickly deepens the strategic shift away from controlling price levels towards maintaining market share. This shift occurred this year, when, among other things, US President Donald Trump called on the group to ease production restrictions in order to keep prices low.

The organisation, led by Saudi Arabia, first acted on his request in April, releasing 138,000 bpd of production. In each of the following three months, it then put an additional 411,000 bpd on the market. For August and September, the pace of easing restrictions will now accelerate further to 550,000 barrels per day, completing the process of unwinding the curbs.

In addition to removing the previous limits totalling 2.17 million bpd, production will also increase by a further 300,000 barrels per day from the United Arab Emirates. The group approved higher production quotas for the UAE last year. Total production growth since April will thus reach 2.47 million barrels per day, or roughly 2.5% of global demand.

Market share versus price stability

According to the International Monetary Fund, Saudi Arabia needs a price of around USD 81 per barrel to balance its budget, while also seeking to prevent the United States from gaining market share. This creates lasting tension between price stability and competition for customers. The decision to focus on global market share also reflects planned production expansion by US oil companies.

An increase in production of this scale may slightly ease pressure on prices, which have recently remained around USD 65–80 per barrel. Oil inventories in OECD countries are stabilising just above the five-year average following the previous cuts, the market may shift from backwardation to a more balanced phase, and price volatility is likely to increase somewhat. Thanks to the gradual easing of quotas, OPEC+ remains flexible: should demand unexpectedly decline, the alliance can slow or halt the return of production, thereby limiting any surplus.