OPEC+ announced plans to increase oil production in response to rising global demand, but actual output levels fail to meet these expectations.
Unsatisfactory Production Growth
Despite OPEC+'s efforts to increase output by 2.5 million barrels per day (bpd) by September, current data suggests that this goal is unattainable. Some countries cannot ramp up production, while others are limited by internal penalties for previous breaches of compliance. As a result, the market remains tight, leading to increasing oil prices.
Saudi Arabia's Role in Production Increase
Saudi Arabia has shouldered the bulk of the effort to increase output. From April to June, the eight OPEC+ producers pledged to add 960,000 bpd, but the actual growth was only 540,000 bpd, for which 70% came from Saudi Arabia alone. However, even with these increases, oil inventories continue to remain low.
Low Inventories and Weak Export Volumes
Global oil inventories remain low, contributing to rising prices. Over the past three years, OECD countries have failed to restore their stock levels. For example, in May, Europe's stocks stood at 394 million barrels, nearly 9% below the five-year average. Summer demand in Gulf countries also cuts into export capacity, as producers must meet high cooling needs.
The situation in the oil market remains tight despite OPEC+'s plans for increased production. Ongoing restrictions and rising domestic demand may hinder price normalization.
