Oil supply consistently fall short as OPEC+ members struggle to fill new output quota

OPEC+ said it would boost production to meet the world’s rising need for oil, but the barrels aren’t showing up. Since April, the group’s eight major producers have been trying to lift output in phases, aiming to add 2.5 million barrels per day (bpd) by September compared to March levels.

But data shows that the increase is out of reach, according to Reuters. Some countries can’t produce more. Others are being told to cut back for breaking the rules in past months. Either way, the result is a tight market where prices are going up, not down.

The group’s internal punishment system is also slowing things down. Iraq and Russia are producing less because they previously overshot their limits. Kazakhstan is already pumping at full throttle. So far, oil futures haven’t dropped despite the scheduled increases. Instead, Brent crude went from $58 per barrel in April to $68 in August.

Saudi lifts output while others hold back or hit capacity

Saudi Arabia has done most of the work. Between April and June, the eight producers pledged to add 960,000 bpd. After subtracting production curbs still in place, the actual increase targeted was 730,000 bpd. But the real growth hit only 540,000 bpd, and 70% of that came from Saudi alone.

Exports rose just 460,000 bpd between March and June. The International Energy Agency said global demand jumped by a full million bpd in the same window. So demand grew faster than supply.

Saudi’s shipments alone rose by 631,000 bpd from March to June, while exports from Russia, Iraq, Kazakhstan, Kuwait, and Oman fell, according to Vortexa. Even though Riyadh went over its June quota, it said the extra barrels went into storage both inside and outside the country.

China’s demand is another piece of the puzzle. It’s been stockpiling. The International Energy Agency said Chinese inventories increased by 82 million barrels during the second quarter, equal to almost 900,000 bpd.

Refineries are running at high capacity. Power plants in the Middle East are burning more oil for electricity during the summer months, which means barrels are getting soaked up locally. That demand pressure helps explain why spot prices are higher than longer-term contracts, a market setup called backwardation. Richard Price, an analyst at Energy Aspects, said, “The market is still tight on the prompt.”

Low inventories and weak exports add to the squeeze

The oil market is still running on low fuel. Over the last three years, OECD countries haven’t recovered their stock levels. In May, Europe’s stocks were 394 million barrels, almost 9% below their five-year average.

In June, U.S. commercial crude inventories stood at 419 million barrels, also under their five-year norm. OPEC+ officials say these low stockpiles prove that more oil is still needed, despite the group’s internal struggles.

Summer demand also drains local barrels. Producers in the Gulf often export less during the hot season to meet higher air conditioning needs at home. This cuts into their ability to ship out what little extra oil they may be producing.

Russia isn’t helping either. Attacks on its energy infrastructure have made it hard to lift production. Meanwhile, other members with limited capacity still want higher quotas during monthly OPEC+ meetings, not because they can use them now, but so they have room to expand later or trade off future cuts.

The penalties aren’t going anywhere yet. Iraq, Russia, and others who overproduced earlier are still under output restrictions. These curbs range from 200,000 to 500,000 bpd a month and will stay in place until at least June next year.

On August 3, the group approved another increase for September. The OPEC+ eight now aim to raise production to 32.36 million bpd. Back in March, that number was 30.80 million bpd. But expectations are low.

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