Crude prices have fallen 12% this year, pressured by increased output from Opec+ countries and elsewhere, and as US President Donald Trump’s trade war weighs on demand.

Yet the market has overall proven surprisingly resilient to the alliance’s strategy shift, giving the oil alliance added confidence to return even more barrels.

Opec+ agreed to a new round of production increases from next month last Sunday, as the group extends a policy shift towards higher volumes after years of defending prices.

In a meeting that lasted 11 minutes, key alliance members approved adding about 137,000 barrels a day from October during a video call as they accelerates the unwinding of its next tier of supply cuts.

The group said in a statement it will return all or part of 1.65mn a day, without giving a period or increments, depending on market conditions.

The Organisation of the Petroleum Exporting Countries (Opec) and its partners or Opec+ stunned oil markets in recent months by reviving 2.2mn barrels of halted production a year ahead of schedule in a bid to reclaim market share, even despite widespread expectations of an approaching supply glut.

The group hopes that a further increase in sales volumes will offset any hit to revenues from lower prices, one delegate said, signalling a reversal of the strategy that Opec+ has espoused since its creation almost a decade ago.

However, the actual volume is likely to be lower than announced, as some members of the group face pressure to compensate for earlier oversupply and forgo their share of production hikes, while several countries lack spare capacity.

The decision is likely to put a renewed spotlight on the unused production levels available in different Opec+ members, as countries that can’t pump more won’t fully benefit from the increased quotas, while they face the added pressure of lower prices.

The group’s decision comes against the backdrop of mounting warnings that the oil market is headed for a significant oversupply as the summer driving season ends in the northern hemisphere.

The International Energy Agency in Paris forecasts a record supply glut next year amid faltering consumption in China, and swelling output across the Americas — from the US and Canada to Brazil and Guyana.

In the second quarter, global oil stockpiles increased by the most since the third three months of 2020, when the global economy was still being ravaged by the Covid-19 pandemic, according to the IEA.

Over that period, stockpiles in the developed world climbed by 60,000 barrels a day, while expanding by more than 1mn barrels a day everywhere else.

Goldman Sachs Group predicts Brent may slump to the low $50s in 2026.

For global oil markets in the longer term, the Opec+ move serves to erode a longstanding safety net of idle production that could be brought back to cushion unforeseen supply shocks.

Granted, there are some bullish factors that could provide some support to oil in the coming months. Winter heating needs will provide periodic boosts to demand, and the possibility of lower interest rates should bolster the prices of commodities including crude and diesel.

But it’s the oil glut — which the IEA says will balloon to a record next year — that is in focus now.

There are, of course, gainers and losers from the decline in global crude prices. But cheaper oil may not translate into a proportional growth boost for global economy as much as it’s generally hoped for.

Longer term, oil companies say global energy future envisages rising demand and population growth, making oil an important fuel
for decades to come. Despite the emergence of renewables, global energy security depends mainly on fossil fuels for the foreseeable future.

The world is in need of a stable oil market with price equilibrium.