OPEC+ Two-Year Strategy Set: 54.7 Million Barrels Per Day Production Boost Confirmed, Remaining Capacity Recovery Time Uncertain

According to APP China's Financial News, OPEC+ announced its two-year oil strategy last Sunday and revealed the final details of a significant production boost. However, this decision has left oil traders with unanswered questions.

In recent months, Saudi Arabia and its partners have continued to pour more oil into an already fragile global market, shocking the oil market and effectively suppressing prices. This has been beneficial for consumers and provided support to US President Trump.

According to the latest decision, OPEC+ member states approved a 54.7 million barrels per day production boost last Sunday, reversing the significant decline in production planned for 2023. The organization is accelerating its capacity recovery efforts to regain market share.

However, the remaining capacity recovery task remains uncertain: the daily supply of 166 million barrels that was suspended two years ago has yet to be confirmed, with estimates suggesting it will not be fully restored until the end of 2026. Representatives at last Sunday's meeting were more vague about this portion of the production plan.

Officials said OPEC+ would decide whether to continue pushing forward with this supply restoration or pause production increases, even reversing recent policies if market conditions warrant. A follow-up meeting is scheduled for September 7th to assess the situation.

Helima Croft, head of commodity strategy at Canadian Imperial Bank of Commerce, pointed out that "the core information conveyed by this ministerial meeting is that all options are being considered, including restoring remaining capacity, pausing production increases, or even reversing current policies." From a future market perspective, OPEC+ may need to consider reducing production.

The International Energy Agency (IEA) latest data shows that although oil demand remains stable this year, the global market will see a significant surplus of 200 million barrels per day in the fourth quarter due to increased supply from North America. Last Friday's weak US economic data further highlighted the potential impact of Trump's tariff policies on consumption.

Goldman Sachs and Morgan Stanley predict that London crude oil futures prices have already fallen 6.7% this year to around $70 per barrel, with a possibility of further declines to the $60 range by year-end, far below the break-even point for government revenues maintained by OPEC+ member states. Goldman believes the alliance may pause production increases and maintain current production levels to observe changes in supply and demand balances. According to a survey of five oil traders, the market generally expects production increases will be put on hold.

However, if Saudi Arabia is true to its stated goal of regaining market share, it may choose to continue pushing forward with the restoration of 166 million barrels per day capacity. Senior analyst Greg Bruge at Eurasia Group analyzed that "we expect OPEC+ to initially adopt a wait-and-see strategy, but if US supply experiences a downturn and demand growth remains stable, further reductions in production will be a likely direction."

Geopolitical factors have complicated the situation. The Trump administration is increasing diplomatic pressure on Russia, protesting its military actions against Ukraine. The US president has threatened to impose a secondary tariff on Russian oil buyers if an agreement on ceasefire cannot be quickly reached.

In this context, Russian Deputy Prime Minister Novak visited Riyadh last Thursday and met with Saudi Energy Minister Abdulaziz bin Salman. Both sides emphasized that this meeting symbolized unity between the two major oil-producing countries. For OPEC+, finding a balance between responding to Trump's price pressure and maintaining alliance cohesion will be a key challenge.

Rystad Energy analyst Jorge León, who previously worked at the OPEC secretariat, pointed out: "Will Russia use reduced remaining capacity of 166 million barrels per day to defend market share? Especially in the background of new US sanctions on Russian oil, how can it safeguard its interests without damaging alliance unity? The organization is still exploring its path forward."