The OPEC+ cartel recently announced another increase in oil production, revealing a 411,000-barrel-per-day rise for June. This follows production increases in April and May, further accelerating the rollback of previous cuts and raising concerns about potential oversupply.
With this move, the cartel of 12 oil-exporting countries (along with 10 other major non-OPEC members) will bring as much as 2.2 million barrels per day back to the market by November, according to five OPEC+ sources, as the group’s leader, Saudi Arabia, may seek to “rebuke” some fellow members for producing above their quotas.
The development comes after United States President Donald Trump had asked OPEC+ earlier in 2025 to increase oil production to help lower prices. Saudi Arabia may be complying as it wants to strengthen ties with Washington, which has been holding talks on a nuclear pact with OPEC+ member Iran.
In the words of Clyde Russell, Asia Commodities and Energy Columnist at Reuters, “In the current global crude oil market, one thing is almost certain: the reasons given by the exporters in the OPEC+ group for increasing supply are not the true ones.”
Why so? In a statement posted on the OPEC website, the eight prominent members of the cartel stated that the decision to increase output was made in light of the “low oil inventories and current healthy market fundamentals.”
“The issue facing OPEC+ is that, although apparent crude inventories are marginally below five-year average levels, they are still far from low enough to raise any concerns,” Russell noted.
Also, there is little evidence to back up the claim of sound market fundamentals. Commercial crude inventories in developed economies in the OPEC were 2.746 billion barrels at the end of February 2025, according to the OPEC monthly report for April. This was 71 million barrels less than the five-year average and down 16.1 million barrels from the previous month.
The OECD stock levels were slightly lower than their five-year average, with a minimal 2.5% discrepancy, a circumstance that may be attributed to the escalating crude oil prices during the period from September 2024 to January 2025 and the impending risk of a worldwide economic deceleration following the resumption of Trump’s presidency in the United States.
“In the context of global oil imports, China, the most prominent, does not disclose its commercial or strategic stockpiles. However, it is plausible that in March, China augmented its storage influx substantially, having experienced a slight depletion during the initial two months of the year. In March, China imported more crude than it converted into refined fuels, resulting in a surplus of 174 million barrels per day, according to calculations based on official data for imports, domestic output, and refinery throughput. Given that the crude oil market is not particularly affected by inventory levels, what can be said about OPEC+’s claim of healthy fundamentals?” asked Russell.
Asia imports
The situation in Asia, which purchases roughly 60% of the world’s seaborne crude volumes and is the largest importing region, is instructive. Following a weak February, the continent’s seaborne imports rebounded in March and April, with arrivals of 25–27 million bpd and 25–28 million bpd, respectively, according to commodity analysts Kpler. This represented an increase from January’s 23.31 million bpd and February’s 23.94 million bpd.
As refiners piled up on cheaper crude due to concerns about tighter American sanctions on shipments from Iran, imports from the Islamic Republic surged sharply in March, which helped boost arrivals. After weakening in March due to Washington’s stricter regulations on ships transporting Russian crude, China’s imports from Russia rebounded in April. In the upcoming months, there is also some uncertainty regarding the demand for crude.
“Although May through July is typically a time of higher demand due to summer construction and agricultural activity, there is a growing chance that Trump’s trade war will begin to reduce oil demand. In addition to lowering container shipping, the hefty 145% tariff on Chinese imports is also expected to have an impact on air freight in the weeks ahead. Road transport in China and the US will be weakened by lower shipping volumes, and both air and road travel are likely to suffer from declining consumer confidence. It will take time for supply chains to recover or be redesigned, so even if trade tensions do ease, the shipping slowdown is already set to last for the next few months and possibly longer,” observed Russell.
So what is OPEC+ attempting to accomplish by increasing output? Maybe, by requiring other members to accept lower prices, Saudi Arabia, the group’s de facto leader, will be attempting to promote greater quota compliance from other members. According to OPEC+ sources, Saudi Arabia is pushing the group to accelerate the unwinding of earlier output cuts to punish fellow members Iraq and Kazakhstan for poor compliance with their production quotas.
Even Barclays noted that the OPEC+ decision is more related to strength in underlying fundamentals and external influence than concerns about member overproduction. The British banking giant now expects the cartel to phase out the additional voluntary adjustments by October 2025, but also expects slightly slower US oil output growth. Overall, this loosens their balance estimates by 290 thousand barrels per day (kbd) for 2025 and 110 kbd for 2026.
Though the move will hurt the American oil industry, which Trump pledged to support, the Saudis might also be attempting to partially satisfy the US President’s demand for lower prices, which would help the latter fulfil a campaign pledge of lower energy costs. Given their higher production costs, OPEC+ may also be attempting to exploit low prices to restrict oil output in other significant producers, like Brazil and the United States.
The way ahead
Expect continued negative volatility in crude oil prices due to bearish factors such as trade conflicts, indications of declining global demand, and the likelihood of increased supply. The mood was also dampened by adverse macroeconomic signs, most notably the unexpected negative growth in US GDP and the steepest decrease in China’s manufacturing activity in over two years.
Furthermore, the prospect of OPEC+, led by Saudi Arabia, potentially boosting output at their forthcoming meeting, added to the gloomy forecast, particularly after Riyadh displayed tolerance towards lower price levels. Still, the price downside was largely restrained by fresh hope that US-China tensions would soon decline. President Trump’s indications of possible trade agreements with China and the Asian country’s willingness to resume trade talks after repeated US overtures offered some support.
“A further boost to bullish sentiment came from Trump’s threat of secondary sanctions on nations that buy Iranian oil. Despite expectations of a build, the EIA reports that US crude inventories dropped by 2.696 million barrels from a supply perspective. Nonetheless, there was a 682,000-barrel increase in stocks at the Cushing hub. There was a notable decrease of 4 million barrels in gasoline inventories, whereas distillate inventories increased by 0.937 million barrels,” Russell noted.
Perceptions of oversupply among oil market participants from increasing OPEC+ output and uncertainty about the economic impact of tariffs have raised short-term oil price volatility, the United States Energy Information Administration said, while reacting to the cartel’s move. Still, the EIA expects OPEC+ to keep production below the group’s current target path. It forecast supply from the group to increase by about 200,000 barrels per day this year to 42.9 million bpd, up from 42.8 million bpd in the EIA’s prior forecast.
Taking note of Trump’s unpredictable and often erratic tariff policies has also been a major drag on oil prices in recent months, which could slow global trade and cause a recession, the EIA concluded in its short-term outlook report: “The effect that new or additional tariffs will have on global economic activity and associated oil demand is still highly uncertain and could weigh heavily on oil prices going forward.”
The decision of OPEC+ to increase oil production may ease prices in the short term, but global demand uncertainty, trade tensions, and market volatility remain. Saudi Arabia’s moves reflect strategy more than fundamentals, while risks for US and other producers continue amid shifting economic conditions.