An installation depicting a barrel of oil with the Opec logo. REUTERS/Maxim Shemetov/File Photo
DUBAI: The Organisation of Petroleum Exporting Countries (Opec) has agreed to accelerate oil production hikes for a second consecutive month, raising output in June by 411,000 barrels per day, the group says, despite falling prices and expectations of weaker demand.
Following an online meeting last Saturday lasting just over an hour, the producer group announced the supply increase, saying the fundamentals of the oil market were healthy and inventories were low.
Oil prices fell to a four-year low in April below US$60 per barrel after Opec announced a bigger-than-expected production boost for May, and as US President Donald Trump’s tariffs raised concerns of global economic weakness.
Opec sources have said Saudi Arabia is pushing Opec to accelerate the unwinding of earlier output cuts to punish fellow members Iraq and Kazakhstan for poor compliance with their production quotas.
The hikes also follow calls from Trump on Opec to raise output. Trump will visit Saudi Arabia later in May.
In December, eight Opec countries that have been implementing the group’s most recent output cut of 2.2 million barrels per day (bpd) agreed to gradually phase it out in monthly increases of about 138,000bpd from April 2025.
The June increase from the eight countries will take the total combined hike for April, May and June to 960,000bpd, representing a 44% unwinding of the 2.2 million bpd cut, according to Reuters calculations.
Brent crude futures lost more than 1% last Friday to US$61.29 a barrel as traders braced for more oil from Opec.
Oil prices are expected to fall today due to the Opec news amid trade tensions and concerns about economic growth, said UBS’s analyst Giovanni Staunovo.
“We continue to call this a ‘managed’ unwind of cuts and not a fight for market share”, he said.
After his participation, Kuwait’s oil minister said the Opec meeting last Saturday would significantly affect production policy formulation in the coming period.
Reuters reported last week that officials from Saudi Arabia, the de facto leader of Opec, have briefed allies and industry officials that they are unwilling to prop up oil markets with further supply cuts.
“Compliance again appears to be the key focus, with Kazakhstan and Iraq continuing to miss their compensation targets, alongside Russia to a lesser extent,” said Helima Croft of RBC Capital Markets.
Kazakhstan defied Opec this month when its energy minister said he will prioritise national interests over those of the Opec group when deciding on oil production levels.
Kazakhstan’s April oil output exceeded its Opec quota despite a 3% fall.
Opec, which includes allies such as Russia, is still cutting output by almost five million bpd and many of the cuts are due to remain in place until the end of 2026. The group plans to hold a full ministerial meeting on May 28.
The largest western oil producers are mostly sticking with their growth plans for now, despite a 16% decline in crude prices during April and a decision by Opec to crank up output in June.
Exxon Mobil Corp, Chevron Corp, Shell Plc, and TotalEnergies SE all maintained their capital spending plans as they reported first-quarter results last week. — Reuters
