After increasing the crude oil production target by 548,000 barrels per day for August, OPEC+ countries have now agreed to increase production by another 547,000 barrels per day starting in September. This move will effectively reverse the production cuts implemented in early 2023, which totaled 2.2 million barrels per day.
What is striking is that the decision comes amid clear signs of weakness in the US labor market — to put it mildly — which calls into question the true strength of the US economy beyond GDP figures. At the same time, ongoing tariff uncertainties, far from being resolved, threaten to complicate the outlook further.
The IMF’s recent upward revision of global growth forecasts for 2025 and 2026 will also hinge much on resolving ongoing tariff disputes. Should trade tensions ease and final tariff rates come in lower than initially threatened, the negative impact on the global economy could be less severe than anticipated.
Even so, at least publicly, OPEC+ defends its decision by citing “stable global economic prospects and solid market fundamentals.” However, other factors are likely at play, particularly of a geopolitical nature. The cartel may be preparing for the possible departure of one of the major players in the market.
Specifically, Trump has threatened to impose new sanctions on Russia if progress toward ending the conflict in Ukraine stalls. These could include so-called secondary sanctions, which impose higher tariffs on countries that continue to import Russian energy. Banning Russian oil would likely boost demand for alternative sources.
In this context, it is not surprising that oil prices rose slightly after the OPEC+ announcement, although the move had little effect on the S&P 500 or Nasdaq. Prices fell again after reports emerged that countries like India continue importing Russian energy. Thus, the market isn't bracing for the worst.
Now, if countries indeed stop buying Russian oil out of fear of secondary sanctions, we could see a sharp spike in oil prices. Whether that spike endures will largely depend on how much the U.S. can ramp up its own oil production. An escalation of tensions in the Middle East could further fuel bullish momentum in the oil market.
For now, however, markets remain cautiously optimistic, with oil prices continuing their downward trend. Goldman Sachs, for example, recently reaffirmed its oil price forecast, projecting Brent crude to average $64 per barrel in Q4 2025 and $56 in 2026, thus not expecting a return to above $80.
However, as always, the outlook depends on rapidly changing circumstances.
