The decision, made during a swift online meeting, signals the producer group's assessment that the fundamental aspects of the oil market remain robust, with inventory levels reportedly low. This move comes even as benchmark Brent crude futures experienced a decline of over 1% on Friday, closing at $61.29 a barrel, as traders anticipated increased supply from OPEC+. Analysts predict further price drops on Monday, compounded by ongoing trade tensions and anxieties surrounding global economic expansion.
Notably, oil prices had already fallen significantly in April, reaching a four-year low below $60 per barrel. This decline coincided with OPEC+'s announcement of a larger-than-expected production increase for May and the implementation of tariffs by the then U.S. President, which amplified fears of global economic weakness.
Sources within OPEC+ have indicated that Saudi Arabia, a key player within the alliance, is advocating for a faster unwinding of previous production cuts. This push is reportedly motivated, in part, by dissatisfaction with the inadequate adherence to production quotas by member nations Iraq and Kazakhstan.
Furthermore, this decision to increase output aligns with calls from the then U.S. President, who is scheduled to visit Saudi Arabia later in May.
Looking back, in December, eight OPEC+ nations involved in the group's most recent 2.2 million bpd output reduction agreed to a gradual phasing out through monthly increases of approximately 138,000 bpd, commencing in April 2025. The additional June increase from these eight countries will bring the total combined production hike for April, May, and June to 960,000 bpd, representing a substantial 44% rollback of the initial 2.2 million bpd cut, according to Reuters calculations.
Despite the recent increases, OPEC+ is still collectively reducing output by nearly 5 million bpd, with a significant portion of these cuts slated to remain in effect until the end of 2026. The group has scheduled a full ministerial meeting for May 28th.
Analysts suggest that the current strategy represents a "managed" unwinding of cuts rather than an aggressive pursuit of market share. However, compliance issues within the group continue to be a focal point. Helima Croft of RBC Capital Markets highlighted that "Compliance again appears to be the key focus, with Kazakhstan and Iraq continuing to miss their compensation targets, alongside Russia to a lesser extent."
Adding to the complexity, Kazakhstan's energy minister recently indicated a prioritization of national interests over OPEC+ agreements when determining oil production levels. Notably, Kazakhstan's oil output in April exceeded its agreed-upon OPEC+ quota, even after experiencing a 3% decrease.
The delicate balance between managing supply, responding to external pressures, and addressing internal compliance issues will likely remain central to OPEC+'s deliberations in the coming months.