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oilmonster
Crude Oil July 09, 2025 03:00:30 AM

Saudi Plays Short and Long Game with OPEC+ Production Gamble

Anil
Mathews
OilMonster Author
To its advantage, Saudi Arabia has a lot of untapped oil production capacity.
Saudi Plays Short and Long Game with OPEC+ Production Gamble

SEATTLE (Oil Monster): Saudi Arabia's drive to rapidly increase OPEC+ oil output may put Riyadh in the pole position to regain market share today while also solidifying its dominance over the long term.

A group of eight major oil producers - Saudi Arabia, Russia, the United Arab Emirates, Kuwait, Oman, Iraq, Kazakhstan and Algeria - decided on Saturday to increase joint production by 548,000 barrels per day in August, speeding up the unwinding of a tranche of cuts totalling 2.17 million bpd that started in April.

The combination of this accelerated schedule and an agreed 300,000 bpd increase in the UAE's base production level mean that by the end of September OPEC+ will likely boost its output target by 2.5 million bpd this year.

Yet the new quotas will not actually lead to a dramatic change in the group’s aggregate output, as most members are already producing at or above those levels.

None more so than Kazakhstan, whose lack of compliance with OPEC+ production targets has irked Saudi Arabia for months. The Central Asian country produced 1.88 million bpd in June, matching March's all-time high, far in excess of its August production target of 1.53 million bpd.

In total, the eight OPEC+ members produced an aggregate 32 million bpd in June compared with a quota of 31.38 million bpd, according to Reuters estimates. So it is clear that unwinding the production cuts is largely about catching up with the reality on the ground.

But by making this move now, Saudi Arabia, the de-facto leader of OPEC+ and the world's top oil exporter, is well-positioned to both reestablish discipline in the group and increase its market share.

Saudi’s share of global oil production has declined from an average of 13% over the past three decades to 11% in 2024, according to the Energy Institute’s Statistical Review of World Energy.

Similarly, the country’s crude exports accounted for only 15% of global seaborne exports in 2024 from an average of 18% in the previous decade, according to analytics firm Kpler.

Riyadh will want to reverse this trend and solidify its dominant global position since oil and gas revenues contributed 22.3% of the country’s gross domestic product in 2024, according to International Monetary Fund figures.

To its advantage, Saudi Arabia has a lot of untapped oil production capacity.

The country produced around 9.55 million bpd in June, according to Keshav Lohiya, founder of consultancy Oilytics, based on Petro-Logistics data. This leaves it with an extra 200,000 bpd of production increases available through August under the OPEC+ deal.

It also has a production buffer of nearly 3 million bpd it can tap within 90 days, according to International Energy Agency estimates.

In short, with the exception of the UAE, Saudi Arabia is the only OPEC+ producer with room to substantially increase production in the coming quarters.

Courtesy: www.reuters.com


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