OPEC+ to pump more oil as market fears shift from shortage to glut

OPEC+ is opening the taps again, extending its production increases as Gulf oil flows recover and prices cool. But with supply rising faster than demand, fears of a global glut are mounting

Welcome to this week’s Fortune Gulf Brief. We’ll be covering:  

• Gulf oil flows return as market eyes potential glut  
• Mubadala unlocks $25 billion credit portfolio for outside investors 
• U.S.’ Lux Capital leads Gulf’s $30 million AI funding round 
• Saudi courts China amid strained U.S. relations 

OPEC+ has agreed to raise oil production by a further 188,000 barrels per day from August, marking the fifth consecutive monthly increase in output quotas as the group continues to unwind its earlier production cuts. 

That brings the total increase in output quotas to around 940,000 barrels a day since the war began. 

The move comes as oil prices continue to ease amid Gulf states ramping up production and the reopening of the Strait of Hormuz calming fears of major supply disruptions.  

Brent crude is now trading around $72 per barrel, down from its April peak of $126 per barrel and close to pre-conflict levels. 

Saudi Arabia, the world’s top exporter, shipped an average of 6.3 million barrels a day last week, restoring flows to almost 90% of February’s pre-war levels. 

Meanwhile, UAE oil exports have now overtaken pre-war levels, according to data compiled by energy intelligence company Kpler. 

The country, which formally exited OPEC+ on May 1, shipped 3.94 million barrels a day of crude and condensate in June.  

In addition to ramping up its production since leaving OPEC+, Kpler senior oil analyst Johannes Raubal said the UAE has also been drawing down crude inventories, further enhancing export volumes. 

But the surge in supply is beginning to raise concerns. Analysts at Morgan Stanley and Goldman Sachs warned last week that the market could be heading for a glut next year if producers continue pumping without consideration of demand. 

China, the world’s largest oil importer, remains one of the biggest question marks.  

The Middle East typically accounts for around half of China’s crude oil imports, but shipments declined in April to their lowest level in almost a decade, according to Kpler data. 

Despite cutting imports by roughly 5 million barrels a day compared with pre-war levels, it has yet to significantly increase its buying. 

Meanwhile, more than 60 million barrels of oil that were effectively stranded when the war broke out have now been released onto the market, following the signing of the U.S.-Iran memorandum of understanding, Bloomberg reported last week. 

It noted that UAE oil is traveling as far afield as the U.S. and is even being offered to buyers in Hawaii. 

Melissa Hancock
melissa.hancock@fortune.com

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This story was originally featured on Fortune.com