Opec+ agrees another rise in oil output for July

Opec+ has agreed to increase its monthly oil output at 411,000 barrels per day for July, the same as in May and June, as it boosts supply at a time of trade tension-induced economic uncertainty.

Analysts say the move may be a gesture to mollify US President Donald Trump, who has spoken of his desire for lower crude prices.

The increase marks the third month in a row that the group, led by Saudi Arabia and Russia, will raise production at the same level, Opec+ said in a statement following a virtual meeting on Saturday.

The decision was "in view of a steady global economic outlook and current healthy market fundamentals, as reflected in the low oil inventories", the group said.

Opec+ noted that gradual increases may be paused or reversed "subject to evolving market conditions", giving them the "flexibility will allow the group to continue to support oil market stability".

The accelerated unwinding of Opec+'s own restriction programme is expected to boost the market's supply surplus into the second half of 2025 "when demand prospects are fragilised by trade tensions", Ipek Ozkardeskaya, a senior analyst at Swissquote Bank, told The National.

Mr Trump, meanwhile, has repeatedly called for lower oil prices to boost the domestic US oil industry.

"We don’t yet know if Opec+'s latest moves are to please Mr Trump or to [align] certain members" with the group's quotas, Ms Ozkardeskaya said.

"Yet the rising supply will likely continue to apply negative pressure on prices – unless there is a sudden shift in the tariff picture like ruling of the tariffs."

Oil prices started 2025 strongly. The closing price of Brent, the benchmark for two thirds of the world's oil, peaked at more than $82 a barrel on January 15, while West Texas Intermediate, the gauge that tracks US crude, hit almost $79 per barrel also on that day.

However, crude prices have since waffled and have been particularly jolted by Mr Trump's sweeping global tariffs that he announced on April 2, which have disrupted stock markets and reignited fears of a global recession, especially as US trade partners – most notably China – unleashed retaliatory levies.

Since then, Brent and WTI have slipped more than 16 per cent and 15 per cent, respectively, and the uncertainty surrounding Mr Trump's flip-flopping over his tariff policies have put pressure on oil prices.

In March, Opec+ said it would proceed with a “gradual and flexible” unwinding of voluntary production cuts of 2.2 million bpd starting in April, adding 138,000 bpd per month until September 2026.

The planned return of production cuts – originally made by eight Opec+ members, including Saudi Arabia, Russia, the UAE and Iraq, in November 2023 – had been pushed back several times amid concerns about growing supply in the market.

In March, the alliance released a new schedule for seven member nations to make further oil output cuts to compensate for exceeding their quotas. The plan includes monthly cuts ranging from 189,000 bpd to 435,000 bpd, with the reductions scheduled to last until June 2026.

Opec has been losing global market share in recent years. In 2024, their output was less than 27 million bpd, down from 30 million bpd a decade ago and after having peaked of 34 million bpd in 2016.

"In addition to trying to enforce stronger discipline within the group, Opec sees [increasing output] as a good opportunity to place pressure on higher cost oil producers, including US shale, and win back some market share," analysts at Jadwa Investment said.

"This policy has the added benefit of bolstering good relations with the US given President Trump’s stated desire for lower oil prices to bring down inflation in the US and force a diplomatic solution to the Russia-Ukraine war."

How Opec+ policy evolves during 2025 will largely depend on internal compliance issues and the broader developments in the oil market, with hikes seen to scale down should global crude inventories start to build up, they added.

The UAE's Minister of Energy and Infrastructure, Suhail Al Mazrouei, this week said Opec+ should be “mindful” about oil demand, and that the group is “doing their best” to balance the market and ensure there is enough investment into the supply.

Mr Al Mazrouei's comments are "constructive", said Giovanni Staunovo, a strategist at Swiss bank UBS.

"Opec+ crude exports are stable versus April, suggesting higher compliance and domestic demand keeps exports in check," the told The National.

At its ministerial meeting on Wednesday, Opec reiterated its "continued commitment ... to achieve and sustain a stable oil market".