Eight members of the OPEC+ oil producers group said Sunday that they would raise their output of crude by a modest 137,000 barrels day in November.
The group’s move, which was led by Saudi Arabia, is the latest in a series of increases beginning earlier this year. The countries announced the same size increase for October.
An addition of 137,000 barrels a day is tiny in the context of global oil supplies of more than 100 million barrels a day. Analysts say these small boosts appear to be intended to keep lifting production ceilings while also signaling caution because of worries that there could be an oversupply in coming months that might depress prices.
In a news release, the countries said they were acting on the basis of “healthy oil market fundamentals” and a “steady global economic outlook.”
The group, which includes Russia, Iraq, the United Arab Emirates, Kuwait, Kazakhstan, Algeria and Oman in addition to Saudi Arabia, has relaxed one program of cuts totaling about 2.2 million barrels a day and has now turned to undoing another agreement, reached in 2023, to reduce output by 1.65 million barrels a day.
These moves initially surprised the energy industry. “I would not have bet a year ago that the OPEC countries” would have been able to unwind their cuts, Patrick Pouyanné, CEO of TotalEnergies, the French energy giant, recently told financial analysts in New York.
Analysts, though, say that the Saudis have decided it is to their advantage to move away from trying to manage markets through production cuts for a number of reasons, including that the lion’s share of increases has gone to them.
Crown Prince Mohammed bin Salman, Saudi Arabia’s chief policymaker, also appears to be giving priority to good relations with the Trump administration, which wants relatively low oil prices for American consumers.
“Of course, they understand that the US is the main and most important strategic ally,” said Bachar El-Halabi, senior analyst in Dubai for Argus Media, a commodities research firm.
President Donald Trump is far more inclined than his predecessor, Joe Biden, to work closely with the Saudis.
The latest example is the announcement Monday by video game developer Electronic Arts that it had to agreed to a $55 billion takeover by an investor group, including Saudi Arabia’s Public Investment Fund and a firm managed by Trump’s son-in-law, Jared Kushner.
The Saudis are also weary of producing well below their capacity to bolster oil prices, while other countries inside and outside OPEC+ take advantage and increase production.
There has been a “reevaluation of the cost of supporting other producers’ output gains,” said Helima Croft, head of commodities research at RBC Capital Markets, an investment bank.
The easing of production cuts has also benefited the Saudis by revealing that the group of eight has far less oil to add than the roughly 5 million barrels a day that markets had once feared. “We had this number just hanging over the market,” Croft said, and it was “fiction.”
The actual amount of oil reaching the market has been considerably less than the announced increases.
As of September, OPEC+ had added 1.5 million barrels a day since the first quarter, well below its target of 2.5 million barrels a day, according to the International Energy Agency.
When the production increases were initially announced, traders worried that the added oil would create a glut, but such worries have eased as the market has so far absorbed the new supplies smoothly.
Brent crude, the international benchmark, was trading at about $64.50 a barrel Friday, down about 2 per cent over the past three months.
This market performance may mean that demand for oil is stronger than some analysts believe.
Only the Saudis and possibly the United Arab Emirates now appear capable of adding substantial volumes of oil to the market, and so the revenue from further lifting production ceilings will largely flow to them.
The realisation that there is little oil to spare in a tumultuous world is helping to prop up prices, analysts say. And the Saudis are “in the driver’s seat right now,” El-Halabi said.
