Saudi Arabia wants more super-size OPEC+ hikes

Saudi Arabia wants OPEC+ to continue with accelerated oil supply hikes in the coming months as it puts greater importance on regaining lost market share, according to people familiar with the matter, Report informs via Bloomberg.

The kingdom, which holds an increasingly dominant position within OPEC+, wants the group to add at least 411,000 barrels a day in August and potentially September, the people said, asking not to be named because the information was private. Riyadh is keen to unwind its cuts as quickly as possible to take advantage of peak demand during the northern hemisphere summer, one person said.

The Organization of the Petroleum Exporting Countries and its allies already agreed to boost production by 411,000 barrels a day in May, June and July, although their most recent meeting saw some disagreement over the strategy. Russia led a faction that wanted to pause the increases to assess their impact, but ultimately the Saudi view prevailed.

The sequence of supply hikes represent a radical shift in strategy for Riyadh, from years of defending prices with production cuts to an active push to drive crude lower. Oil fell to a four-year low under $60 a barrel in London in April, when OPEC+ first surprised the market with an output increase that was triple the scheduled amount. Futures were trading near $65 a barrel in London on Wednesday.

When the accelerated supply hikes began, OPEC+ delegates initially said it reflected the Saudi Arabia’s desire to punish over-producing members by pushing down prices. Now, as the world faces a prolonged period of cheaper crude, recouping lost market share has become the primary motivation for Riyadh, the people said.

For that reason, the kingdom sees no reason to slow down — as Russia, Algeria and Oman suggested at the last OPEC+ meeting — because seasonal demand will peak in the coming months, the people said. Before the group’s most recent meeting, there had been some discussion of an even larger increase, according to people familiar with the matter.

The eight OPEC+ members making so-called voluntary production cuts are halfway through reviving 2.2 million barrels a day of output. If the current accelerated pace continues they will be done by the end of September, a year ahead of schedule.

This policy shift offers relief to consumers and helps central banks grappling with stubborn inflation, but creates financial peril for oil producers. The Russian government’s petroleum revenue fell to the lowest in almost two years in May following the plunge in crude prices.

The differences between Moscow and Riyadh, the cartel’s two most powerful members, will come back into play on July 6, when OPEC+ meets again to discuss output levels for August.