OPEC+ Weighs Major Oil Production Hike for July

OPEC+ targets an oil production hike to regain lost market share and challenge rival producers.

A fresh wave of volatility could hit the oil industry in the coming months, driven by the OPEC+ alliance’s plan to ramp up oil production in July. On Thursday, delegates of the Organization of the Petroleum Exporting Countries (OPEC) group stated that they are planning for a third consecutive oil production hike that is under discussion, although no final conclusion has been made.

Two consecutive production hikes have already been confirmed by OPEC+ each for May and June, with each increasing 411,000 barrels per day (bpd), three times more than what the group had initially planned. At a meeting on June 1, OPEC+ producers such as Saudi Arabia, UAE, Kuwait, Russia, Iraq, Oman, Algeria, and Kazakhstan will decide whether to permit another 411,000 bpd hike for July. Meanwhile, another motive behind the oil production hike is to penalize over-oil-producing allies and regain the market share from the United States by competing with U.S. shale production. Previously, U.S. shale producers were the strongest competitors that extracted oil at a lower cost from underground rock formations. The 12-member group has lost market share to American shale companies as a result of advancements in technology and innovative drilling techniques. 

OPEC+ member countries that had previously cut back production to maintain higher prices are now discussing whether to approve another oil production hike in July. The price of crude oil fell 0.9% to $64.31 a barrel on Thursday following the announcement of 411,000 barrel hikes for May and June, which is equal to about 1% of current OPEC+ output.