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Informist, Wednesday, May 21, 2025

 

By Pallavi Singhal and Ashutosh Pati

 

NEW DELHI – The Organization of the Petroleum Exporting Countries and allies is likely to consider smaller production increases in the coming months after allowing the market to absorb the recent aggressive oil output hikes, Pulkit Agarwal, head of India content (cross-commodities expert) at S&P Global Commodity Insights, told Informist.

 

"The OPEC+ is likely to continue calibrating its supplies, allowing them to get absorbed by the market, and then come with smaller increases," he said. However, if competition for market share ensues, the grouping might aggressively increase production to flood the market, potentially causing oil prices to fall, he added.

 

Earlier this month, eight members of OPEC and its allies--Algeria, Iraq, Kuwait, Saudi Arabia, the United Arab Emirates, Kazakhstan, Oman, and Russia--agreed to raise production by 411,000 barrels per day in June, the second consecutive month of aggressive supply hikes. The cartel attributed the increase in supply to "healthy market fundamentals" reflected in low global oil inventories.

 

Some members of the alliance, such as Kazakhstan, have been producing more oil than their allotted quotas. OPEC has recently taken the stance to ask over-suppliers who have crossed their quotas to cut down production and ask suppliers who are voluntarily cutting down and supplying below target to increase production, Agarwal said.

 

The original plan of OPEC and its allies was to gradually unwind production cuts totalling 2.2 million barrels per day over 18 months. However, the cartel decided to bring around 1 million barrels per day of supply back in a span of three months. The cartel will meet on Jun. 1 to decide the production levels for July.

 

Global oil demand has seen high fluctuations in the past few years, recovering after the COVID-19 pandemic and then slowing down again. To meet the market scenario, OPEC has been cutting down its supplies since 2022. Sluggish demand, coupled with concerns about an oversupply, pushed Brent crude prices to a four-year low of $58.40 per barrel in April. S&P sees Brent crude oil prices averaging at $60 per barrel in 2025.

 

At 1527 IST, the most-active July Brent crude oil contract was 1.2% higher at $66.14 per barrel.  End

 

US$1 = INR 85.64

IST, or Indian Standard Time, is five-and-a-half hours ahead of GMT

 

Edited by Tanima Banerjee

 

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