OPEC+ delegates have indicated a strategy to pause further oil quota increases after September 2026. This follows a series of incremental hikes that have been in progress for several months, aimed at fully reversing production cuts initiated during previous market disruptions. While the group has been increasing quotas on paper, the actual ability of all member nations to meet these higher targets has been questioned, especially given ongoing geopolitical factors affecting production and exports from certain regions.
The recent increases have been modest, with seven major nations, including Saudi Arabia and Russia, set to add 188,000 barrels a day to their output target in August, which would bring the total to 940,000 barrels a day since the war began, representing almost 1% of global demand. The group formally agreed to restore about two-thirds of a 1.65 million barrels a day supply cutback made in 2023, with plans to finalize the remaining portion in three monthly stages by the end of September. This overall strategy suggests a completion of the unwinding of cuts made in the wake of the pandemic's uneven recovery, with eight key members expected to have unwound some 2.2 million b/d of production cuts by the end of September.
Despite the planned unwinding, concerns about a potential oversupply in the fourth quarter and early 2026 loom, with analysts from Clear View Energy Partners suggesting Dated Brent crude could fall below $60/barrel by year-end and average $56/barrel in 2026 if production rises and demand growth is modest. This prospect is influencing discussions within OPEC+, where options include a pause in raising quotas, pushing on with unwinding cuts, or even scaling back quotas. The group also needs to address overproduction compensation from early 2024, a significant point of contention.
The ability of all OPEC+ members to increase output in line with quotas is a key factor, as some countries are already producing near their full practical capacity. Saudi Arabia, the UAE, and Kuwait hold most of the spare capacity and have driven recent output growth. Recent data showed OPEC+ countries produced 380,000 b/d below their July targets. This discrepancy suggests that while quotas may be increased on paper, actual market supply might not rise commensurately, potentially providing some support for prices even amid official quota hikes.
