OPEC+’s recent unexpected decision to increase oil output in a well-saturated market raises concerns about the group’s internal discipline. In a video conference on Thursday, OPEC+, which includes countries like Russia, surprised many observers by announcing an increase of 411,000 barrels per day starting in May.
This amount represents a three-month acceleration of existing output plans and was justified by the group as a reflection of “continuing healthy market fundamentals and the positive market outlook.” However, this reasoning is questionable, especially as global oil prices were already declining due to fears of an economic slowdown prompted by U.S. trade policies.
The International Energy Agency had previously predicted a surplus in the oil market for the year even before OPEC+ announced its new output increases. Following the announcement, Brent crude prices dropped 7%, exacerbated by China’s retaliatory tariffs, leading to prices that hark back to levels witnessed during the early pandemic.
The puzzling decision from OPEC+ seems to be deeply tied to internal politics rather than sound economic analysis. Issues with members not adhering to production quotas have been growing, particularly with countries like Kazakhstan, the United Arab Emirates, and Iraq boosting their output contrary to OPEC+ agreements.
Kazakhstan’s production recently hit a record high, which is likely to have frustrated Saudi Arabia, the group’s de facto leader. This situation is further complicated by geopolitical concerns.
Increased oil availability may align with U.S. interests as the administration seeks lower oil prices, but it places additional pressure on members like Iraq and Kazakhstan, which rely on higher prices. The OPEC+ decision appears to be an attempt to mask internal issues rather than a rational economic strategy, exposing the group’s struggle for cohesion and control over its narrative.