OPEC+ agrees to further increase oil output in June
(Bloomberg) – OPEC+ agreed to surge output again in June, as the group’s leaders continue an accelerated revival of supply aimed at punishing over-producing members that has sent crude prices plunging.
Key nations led by Saudi Arabia and Russia agreed to add 411,000 bpd next month, according to a statement on OPEC’s website following a video conference on Saturday. The hike mirrors a similar increase announced last month, when the group made the shock decision to bring back triple the planned volume for May.
Crude traders had already been bracing for a large increase after Saudi Arabia signaled in recent weeks that it was willing to accept a prolonged period of low oil prices. But it builds on a dramatic reversal in recent months from the cartel’s longstanding position of defending oil prices, raising questions about the future of the alliance and spurring speculation about a price war.
While the statement cited “current healthy market fundamentals,” OPEC+ delegates have attributed the strategy shift to Saudi frustration with overproduction by members like Kazakhstan and Iraq, and have chosen to discipline them through the financial “sweating” of a price slump.
Riyadh is seeking to strengthen ties with U.S. President Donald Trump, who will visit the Middle East this month and has called on the Organization of the Petroleum Exporting Countries to lower fuel costs. Trump is also holding volatile talks on a nuclear pact with Riyadh’s political foe and fellow OPEC member, Iran.
Oil prices traded near $61 a barrel in London on Friday, close to a four-year low, as the Saudi pivot added to fears over Trump’s tariff onslaught against China — the world’s biggest oil importer — and other major economies. Even before OPEC+ began to ramp up output, oil markets faced a 2025 surplus due to slowing Chinese demand and plentiful American supply.
The plunge in prices threatens oil firms including U.S. shale producers, who have warned they’ll be unable to obey Trump’s call to “drill, baby, drill” toward a new era of American energy dominance. It also spells pain for members of OPEC+ including the Saudis themselves.
The kingdom has been already been forced to cut investment in projects at the heart of Crown Prince Mohammed bin Salman’s plans for economic transformation, such as the futuristic city, Neom. The outlook for Mideast nations was downgraded last week by the International Monetary Fund, which estimates that Riyadh needs oil prices above $90 to cover government spending.
So far, the “sweating” appears to have had little success in reforming the alliance’s rogue producers.
While Iraq is making some effort to respect its targets, the same can’t be said for Kazakhstan, the group’s most flagrant quota-cheat and the main focus of Riyadh’s ire.
Kazakhstan has limited scope to rein in international oil firms like Chevron Corp. and Eni SpA as they work on projects to expand production capacity, and people familiar with the matter have previously said the country hasn’t even asked them to curtail operations. Astana exceeded its OPEC+ target by a massive 422,000 bpd in March, the group’s data show.
The eight OPEC+ members involved in the curbs are in the process of restoring production halted since 2022. They will meet on June 1 to decide production levels for July, according to the statement.
