The OPEC+ cartel announced on Saturday that it would increase oil production again. It announced a 411,000-barrel-per-day oil production increase for June, after increasing production in April and May, accelerating its rollback of previous cuts and evoking fears of oversupply. The news resulted in Brent and West Texas Intermediate (WTI) oil futures down more than 3% in early Monday trading. WTI, the U.S. benchmark, was trading around $56 per barrel, well below most domestic drillers’ break-even price, which the Energy Information Administration reports averages $62 per barrel in the Permian Midland Basin and $64 per barrel in the Permian Delaware Basin, the two largest basins in the Permian, using data from a Dallas Fed Energy survey. OPEC+ could bring as much as 2.2 million barrels per day back to the market by November, according to five OPEC+ sources, as the group’s leader, Saudi Arabia, may seek to rebuke some fellow members for producing above their quotas.
According to Reuters, the June increase from the eight producers in the OPEC+ group will take the total combined increases for April, May, and June to 960,000 barrels per day, representing 44% of the 2.2 million barrels per day of various cuts agreed on since 2022. OPEC+ could fully undo its voluntary cuts by the end of October if members do not improve compliance with their production quotas. Saudi Arabia is pushing OPEC+ to speed up production increases from previous output cuts to punish Iraq and Kazakhstan for not complying with their production quotas. The production increases will also be a challenge to U.S. shale oil producers because oil prices are dropping below break-even points, as mentioned above.
Because of the extra supplies, forecasters are lowering their oil price forecasts. Barclays and ING lowered their Brent crude forecasts following the OPEC+ decision. Barclays reduced its Brent forecast by $4 to $66 a barrel for 2025 and by $2 to $60 for 2026. ING expects Brent to average $65 this year, down from $70 previously. Morgan Stanley also reduced its price forecast, predicting $62.50 a barrel for Brent in the third and fourth quarters of 2025, $5 lower than its previous forecast. Goldman Sachs expects Brent crude to average $60 per barrel for the rest of 2025 and $56 a barrel in 2026, down by $2 from its previous estimate. It has also lowered its forecast for WTI oil by $3 per barrel, now projecting it to average $56 per barrel for the rest of 2025 and $52 per barrel in 2026. Also affecting oil prices is weak petroleum import demand and President Trump’s tariffs.
President Trump had asked OPEC+ earlier this year to increase oil production to help lower oil prices. Saudi Arabia may be complying as it wants to strengthen ties with Washington, which has been holding talks on a nuclear pact with OPEC+ member, Iran.
U.S. Oil Production
U.S. oil production increased by 270,000 barrels per day in 2024 to average 13.2 million barrels per day. Almost all of the production growth came from the Permian region. In 2024, the Permian region in western Texas and southeastern New Mexico produced more oil than any other region, accounting for 48% of total U.S. oil production. Permian region production rose by 370,000 barrels per day in 2024 to average 6.3 million barrels per day. The increase was aided by WTI oil prices, which averaged $77 per barrel in 2024.
The Permian region production increase occurred despite a lower rig count. The region averaged 308 active drilling rigs in 2024, 26 fewer rigs than in 2023, accounting for more than half of the rigs in operation. Despite the lower rig count, Permian production increased because well productivity improved. According to the Energy Information Administration, producers used technological advancements such as artificial intelligence, electronic hydraulic fracturing technology, and automated drilling processes to optimize operations. The movement toward digital solutions has improved drilling and completion techniques and reduced rig downtime, also providing advanced analytics to help future operations.
Oil production in the Eagle Ford and Bakken regions helped overall growth. Each contributed 9% to U.S. oil production in 2024 with their oil production rising similarly — by 13,000 barrels per day to 1.2 million barrels per day despite a lower rig count. The rig count in the Eagle Ford fell by 9 rigs in 2024 to average 54 rigs, while the rig count in the Bakken fell by 2 rigs to average 34 rigs.
Conclusion
OPEC+ has announced additional oil production increases for June, adding to the increased production levels in April and May that the cartel had agreed to produce. If that trend continues, the cartel will likely replace all of the 2.2 million barrels per day it had cut beginning with the COVID lockdowns to keep oil prices in the $70 a barrel range by November. The production increases will lower oil prices, which could cause challenges for U.S. shale oil operators because the price declines could put them below their break-even points. President Trump asked OPEC+ to increase production as he wants energy prices to fall, and it seems like Saudi Arabia is complying with his wishes, as the Saudis would like to strengthen their ties with the United States. Saudi Arabia may also be increasing OPEC’s production to punish Iraq and Kazakhstan for not keeping to their quotas.
