Crude oil prices dipped in the early hours of Tuesday following the OPEC+ decision to gradually increase crude oil production after multiple delays.
In the meeting held on Monday, the organisation said it would increase output by 138,000 barrels per day starting in April, with the possibility of restoring about 2.2 million barrels per day by 2026.
The decision comes amid ongoing pressure from U.S. President Donald Trump to lower oil prices.
This was announced on the OPEC+ website at a time when crude oil traders were widely anticipating another postponement.
Brent crude fell by as much as 2.8% following the news to settle at $71.26 per barrel in London.
The statement emphasised that the output increases could be paused or reversed depending on market conditions as the move was said to be a flexible approach to support oil market stability.
“This gradual increase may be paused or reversed subject to market conditions,” the group noted. “This flexibility will allow the group to continue to support oil market stability.”
The decision showed the balancing act OPEC+ faces between stabilizing oil prices and managing political and economic pressures.
Saudi Arabia, whose fiscal needs require higher oil prices, has been cautious about increasing output too quickly.
However, ongoing pressure from President Trump, who recently urged the cartel to cut prices, appears to have influenced the timing of the decision.
Analysts suggest that the move also aligns with the interests of Russia, a co-leader of the coalition, which has been looking to leverage its position in the oil market amid fresh sanctions imposed in the final days of Joe Biden’s administration.
Warmer relations between Moscow and Washington under Trump’s presidency may have further encouraged Russia’s support for the production hike.
“The optics around any reinstatement of supply, even if incremental and small, will be seen as price-negative,” said Harry Tchilinguirian, head of oil research at Onyx Commodities Ltd., before the decision was announced.
The increase in production comes at a time when global oil markets are grappling with an anticipated supply surplus of 450,000 barrels per day this year, according to the International Energy Agency (IEA).
Rising output from the United States, Brazil, Canada, and Guyana is expected to outweigh growth in global oil consumption, adding downward pressure on prices.
The IEA’s forecast suggests that even if OPEC+ maintains flat output levels, a surplus would still materialize and eventually complicate the group’s efforts to support prices.
Also, Saudi Crown Prince Mohammed bin Salman’s pledge to invest $600 billion in the U.S. reflects a broader strategy to strengthen economic ties with Washington and potentially soften the impact of production increases on bilateral relations.
The decision to gradually increase output also underscores the internal divisions within OPEC+. While some member nations, particularly those with higher fiscal break-even points, are eager to raise production to boost revenues, others are wary of further price declines.
OPEC+ has postponed production hikes three times since first announcing a supply roadmap last June, reflecting the group’s cautious approach to managing market dynamics.
The challenge will be to balance the need for higher revenues with the risk of further price declines if demand fails to keep pace with the increased supply.
