Introduction

In a significant shift in strategy, OPEC+ has announced plans to increase oil production starting in April 2025. This move comes after the group's efforts to throttle supply and boost prices have not yielded the desired results. The decision reflects a recognition of "healthy market fundamentals" and a positive outlook, despite some market participants expressing concerns about the timing of this increase.

Background: OPEC+ Production Cuts

OPEC+ has been implementing deep production cuts since late 2022 to stabilize the oil market and support prices. In November 2023, the group agreed to voluntary cuts totaling 2.2 million barrels per day (b/d) for the first quarter of 2024. These cuts were extended through the end of March 2025. However, despite these efforts, oil prices have not risen as expected, partly due to robust supply from non-OPEC+ countries and global economic factors.

The New Production Plan

Eight OPEC+ members—Saudi Arabia, Russia, Iraq, Kuwait, the UAE, Algeria, Kazakhstan, and Oman—will gradually ease their voluntary production cuts over an 18-month period from April 2025 to September 2026. This plan includes a 300,000 b/d increase in the UAE's production target, which will be phased in over the same period. The production targets of these members are expected to rise by an average of 137,000 b/d each month, representing a significant increase in output.

Key Points of the Plan:

• Gradual Increase: The production increase will be gradual and flexible, allowing for adjustments based on market conditions.
• UAE Quota Increase: The UAE will see a 300,000 b/d increase in its production target.
• Market Outlook: The decision is based on healthy market fundamentals and a positive outlook, though some market participants have expressed concerns about the timing.

Impact on the Oil Market

The decision to boost production could have several implications for the oil market:

1. Price Dynamics: Increasing supply could potentially cool off oil prices, which have been volatile due to geopolitical tensions and supply-demand imbalances.
2. Market Competition: Non-OPEC+ countries, particularly the United States, Canada, Brazil, and Guyana, are expected to drive significant growth in global oil production. This could further challenge OPEC+’s market share.
3. Economic Factors: The move reflects a gamble on the tightness of the crude market, with some OPEC+ members seeking to regain market share after months of production curbs.

Global Oil Production Trends

In 2025 and 2026, global petroleum and other liquids supply is expected to grow more in non-OPEC+ countries than in OPEC+ countries. The U.S., Guyana, Canada, and Brazil are leading this growth, with the U.S. alone expected to increase production by 1.1 million b/d over the period. This shift underscores the changing dynamics in the global oil market, where OPEC+’s dominance is gradually being eroded.

Non-OPEC+ Production Growth:

• United States: Expected to grow by 1.1 million b/d.
• Guyana: Forecasted growth of 0.2 million b/d in 2025 and 0.1 million b/d in 2026.
• Canada and Brazil: Each expected to increase production by 0.5 million b/d and 0.3 million b/d, respectively, over the period.

Conclusion

OPEC+’s decision to increase oil production marks a strategic shift in response to evolving market conditions. While the move aims to support market stability and regain market share, it also reflects the challenges faced by the group in influencing oil prices in a rapidly changing global energy landscape.