OPEC+ significantly increases oil production again in September - Commerzbank

The eight OPEC+ countries with voluntary production cuts decided on Sunday, as widely expected, to increase the agreed production volume in September by a further 547,000 barrels per day, Commerzbank's commodity analyst Carsten Fritsch notes.

Increasing production at Russia's expense may jeopardize OPEC+

"As in previous months, the press release referred to a steady economic outlook, healthy fundamentals and low inventories. With the latest production increase, the voluntary production cuts from the second half of 2023 and early 2024, amounting to 2.2 million barrels per day, will be completely reversed one year earlier than originally planned. This means that oil supplies from OPEC+ are unlikely to rise further after September."

"The remaining production restrictions totaling 3.66 million barrels per day are set to remain in place until the end of 2026, according to a decision by OPEC+. This also applies to the voluntary production cuts of 1.66 million barrels per day that have been in place since May 2023 by the same eight countries. However, these could also be reversed earlier, according to OPEC delegates, depending on market conditions. Sources say that this could be discussed at the next virtual meeting of the eight countries on September 7. However, it is unlikely that a further reversal of the production cuts will be decided at that time. The next OPEC+ meeting at the end of November would be a more likely venue for such a decision."

"In view of the considerable oversupply looming in the autumn, it is not advisable for OPEC+ to further increase production in the fourth quarter. However, this could change if the secondary tariffs threatened by the US against buyers of Russian oil lead to a displacement of oil supplies from Russia. If, for example, half of Russia's oil supplies to China and India were to be cut off and replaced by other suppliers, the resulting oversupply based on IEA forecasts would be absorbed. However, as we explained on Friday, increasing production at Russia's expense would jeopardize OPEC+'s existence and would therefore not be without risk."