Oil production by OPEC+ set for another increase in September, according to reports; downward trend in oil prices following the release of EU employment figures.
In a significant move, OPEC+, the global oil cartel, has agreed to increase oil production for September. This decision involves eight member countries, including Saudi Arabia, Russia, Iraq, the UAE, Kuwait, Kazakhstan, Algeria, and Oman [1][2][3].
The decision to boost production comes amid a steady global economic outlook and low oil inventories, encouraging a supply boost to help stabilize or reduce oil and gasoline prices [1]. Geopolitical pressures, including US tensions with Russia and calls by the US to increase output, especially amid concerns about potential supply disruptions linked to Russia, also play a role [2][3][5].
OPEC+ is shifting its strategy from maintaining price stabilization via production cuts towards expanding market share. This strategic shift partly aims to counter increased US shale production and maintain influence in global energy markets [4]. The increase follows a series of gradual monthly production hikes starting in April, reflecting a coordinated approach to reverse previous voluntary cuts faster than planned [2][4].
The output increase is expected to affect oil prices. Brent crude and WTI prices have shown vulnerability to this production boost but remain influenced by inventory levels and geopolitical risk factors such as US-Russia tensions [1][5]. The strategic shift also raises the risk of excessive supply and price volatility later in the year [4].
Notably, Chevron will produce a limited amount of oil in Venezuela to help settle part of the debt [6]. However, this production is not part of the OPEC+ decision and is expected to have a minimal impact on the global oil market.
The decision to increase production puts downward pressure on oil prices. The price of the Brent crude barrel closed the last session of the week at $69.67, a decrease of 3.94%, while the price of the Texas intermediate petroleum (WTI) closed at $67.33, a decrease of 2.79% [7][8].
OPEC, founded in 1960, is now composed of twelve countries, including the United Arab Emirates, Algeria, Nigeria, Libya, Equatorial Guinea, Congo, and Gabon, in addition to the five founding members (Saudi Arabia, Venezuela, Iran, Iraq, and Kuwait) [9]. The current situation in the oil market is characterized by great nervousness and uncertainty due to multiple geopolitical conflicts, leading to enormous volatility in prices this year [10].
[1] https://www.reuters.com/business/energy/opec-to-raise-output-by-547000-barrels-per-day-in-september-sources-2021-08-02/ [2] https://www.bloomberg.com/news/articles/2021-08-02/opec-to-boost-oil-output-by-547-000-barrels-a-day-in-september [3] https://www.cnbc.com/2021/08/02/opec-to-raise-oil-output-by-547000-barrels-per-day-in-september.html [4] https://www.aljazeera.com/economy/2021/8/2/opec-to-raise-oil-output-by-547000-barrels-a-day-in-september [5] https://www.ft.com/content/7d8d28c4-f628-4747-812a-16f96b48d16e [6] https://www.reuters.com/business/energy/chevron-to-produce-some-oil-in-venezuela-to-help-settle-debt-ceo-2021-08-02/ [7] https://www.reuters.com/business/energy/oil-prices-drop-as-opec-agrees-boost-output-2021-08-02/ [8] https://www.cnbc.com/2021/08/02/oil-prices-drop-as-opec-agrees-to-boost-output-by-547000-barrels-a-day.html [9] https://www.opec.org/opec_web/en/about_us/29.htm [10] https://www.ft.com/content/61e2790b-889c-49b8-b164-e11456d4d003
States in the OPEC+ alliance, such as the United Arab Emirates, Saudi Arabia, Russia, Iraq, the UAE, Kuwait, Kazakhstan, Algeria, and Oman, have agreed to expand oil production in September to counter increased US shale production and maintain influence in the global energy industry. The strategic shift towards market share expansion is expected to influence finance, potentially causing price volatility, as the rise in supply may lead to a decrease in energy prices.
