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This week, oil executives and officials from some of the world's largest oil producers countries like Saudi Arabia and Nigeria are gathering in Vienna, where OPAK, the Organization of the Petroleum Exporting Countries, is headquartered, and the purpose.

Is to bring together is some of the biggest players in the space.

Bloomberg's Germani Brassecci is in Vienna covering Ope's gathering, and given what's been happening recently, there is a lot for the group to discuss.

Remember, we are coming off the most volatile period for oil in the last couple of years.

We're coming on the air with breaking news.

Israel has just launched air strikes into Iran.

Massive precision strikes are on the three key nuclear facilities in the Iranian regime.

After that twelve day war between Iran and Israel, we saw massive geopolitical premium get priced into the oil curve, and here we are pretty much all of that geopolitical premium was wiped out.

Coming on the heels of another big OPECH plus decision.

OPEK plus, which includes even more oil producing countries, made a surprise move over the weekend, it announced plans to boost oil production by more than half a million barrels a day, a big production increase at a time when investors are worried about oversupply.

Now the world's largest oil producers are at a crossroads, and what happens next could ripple through the global economy.

I'm David Gerret and this is the big take from Bloomberg News today.

On the show, what OPEC Plus's production surge says about the influence it has on oil markets.

Today, we look at what motivated the alliance's latest move, what it means for markets, and who actually calls the shots in the multi trillion dollar oil industry.

The Organization of the Petroleum Exporting Countries is a coalition that dates back to the nineteen sixties.

At first, its membership consisted mostly of Gulf states like Iran, Iraq and Saudi Arabia, but over the years its ranks have expanded to include countries like Ecuador, Indonesia and Nigeria, and about a decade ago, an alliance called OPEK plus formed, which includes an additional ten oil producers, including Russia and Kazakhstan.

The purpose is to coordinate oil production policy around the world to keep prices stable and to ensure that you're both maximizing potential revenue for producers but at the same time keeping prices affordable for consumers.

For years, OPEK was the major player in the global oil market, but it doesn't have as much influence as it used to.

The United States has become a major player after it ramped up the extraction of shale oil through a process known as fracking.

The US is now the largest oil producer in the world, and notably, it is not a member of OPEC or o PECK plus.

So as it stands today, OPEK plus their decisions still matter hugely, but of course they're not the only game in town.

Still, what these countries decide to do when it comes to how much oil they produce can send shockwaves through the global economy.

That happened back in twenty twenty three when OPEC plus decided to cut production by an additional one million barrels a day.

The cuts were meant to rebalance the global oil supply.

Crude prices had fallen and analysts were predicting a glut ahead, and.

Therefore they took the decision to withhold barrels ie, to withhold production from the markets, and so called these voluntary cuts because then a group of eight producers started withholding production from the markets per and agreed schedule, and the whole purpose of that was to introduce again some price stability.

Initially those cuts were meant to be around for say six months or so, they kept getting extended, but then at the beginning of this year, so around on spring of twenty twenty five, they announced that they were going to start slowly unwinding the cuts that were introduced in twenty twenty three.

In other words, OPEC plus was shifting course and boosting production again.

The plan was to do it gradually, bringing back slowly, slowly a little bit more than one hundred and thirty thousand barrels a day.

But what has happened in the last four months, they've accelerated the putback.

So from May June July they surprised the market by increasing monthly production by more than four hundred thousand barls per day.

That's three times the volume initially scheduled in those first three months.

Jamana says there are a number of reasons for the recent surgeon production, among them a desire by opek's most powerful member, Saudi Arabia, to punish members like Kazakhstan and Iraq which exceeded their quotas.

Then there's the growing influence of non OPEC producers.

You were seeing a huge pickup in supply from the likes of Canada, Brazil, Guyana, so their non OPEC countries bringing their extra production to the market, and that's obviously got to be a concern for OPEC from a market share perspective.

So when analysts were analyzing this decision and trying to, you know, put together the rationale for why OPEC plus decided to accelerate the unwines of these vluntry cuts, one of the clear rationals was because they felt that they were one losing market share.

Two of course they felt that the market could handle it.

And then three and this probably isn't something that they would say explicitly, but of course you do have a president in the White House who repeatedly talks about his desire to see lower oil prices.

And I'm also going to ask Saudi Arabia and OPEK to bring down the cost of oil.

You got to bring it down.

And perhaps they sense an opportunity both politically and economically to put more barrels back into the market, but also appease the United States.

Let me stick with that for a second.

So as you say, it's no secret that President Trump wants low oil price and he's been pressuring OPEK to slash prices for months now.

He met with OPEC leadership on his recent tour of the Persian Gulf.

To what degree was this a direct response to that?

Of course, the US not a party of OPEC or OPEC.

Plus, how much influence does does the US have and how much is this attributable to what the President's been saying.

They will not tell you directly, but I mean, for sure they're going to be motivated and influenced by the US and by a very vocal president sitting in the White House.

But then also don't forget that if prices go too low, then that also backfires on some of the drillers and the US producers as well, because already, if you look at say the riccounts, the active oil riccounts in the US this year, they're back down to low's not seen since September twenty twenty one.

And why is that the case?

Because oil prices are lower and so if you think about it from OPI plus's perspective, maybe they're willing to tolerate lower prices if that also means that they're building market share and they are reducing the ability of some of their big competitors in the US, these shale drillers to also bring production to the market.

So opek plus seems willing to deal with lower oil prices.

And this weekend's decision confirms that their members gathered on a video conference call and it didn't take long for them to announce that in August they will add five hundred and forty eight thousand barrels of oil to the market every day.

It was a ten minute meeting, so it was fairly quick.

Every one of those members who were part of the voluntary cutting group were in unanimous support of this decision.

There really seems to be a desire to get these barrels back to the market now.

Their justification at the time when they put out the statement on Saturday, they said that the market fundamentals support it.

They spoke about lower inventory.

It seems as though opek plus the voluntary cutters did see a window of opportunity here to bring back those extra bowels to the market without upsetting oil prices too much.

And actually, if you look at the price reaction, say in Brent on Monday, it barely dipped to we're down about half a percent and actually were higher on the week now since they made this decision, which does tell you that perhaps a certain extent the market was ready to absorb these extra bellels.

But then, of course the question becomes, this is now what happens in a couple of months time once the seasonal demand drivers are out of the way.

That OPEC plus news broke on Saturday, and on Sunday, global markets were surprised again by another move, this one by opek's most powerful member and the world's second largest oil producing nation, Saudi Arabia.

We dig into that after the break on Sunday, a day after OPEC plus decided to boost production by more than half a million barrels a day in August, Saudi Arabia's state owned oil company, Saudi Aramco, announced it would raise oil prices in Asia next month by more than expected.

It would raise the price of its most popular crude oil by one dollar a barrel.

Bloomberg'stremani Brassecci explains why that is so significant.

That was a bit surprising and does actually reflect the fact that ARAMCO do see healthy demands coming from those parts of the world, and for Saudi Arabia their biggest buyers coming from the East and coming from Asia.

That was actually quite notable.

And I will tell you I've spoken recently to the aram COO CEO to Aminaser before the open plus decision, before the Iran is there a war even and he was saying that he actually does see the market as pretty balanced.

They still see healthy signals coming through from Asia, despite the naysayers there and the fact that many in the industry seem to think that demand from China will be leveling off as there's been more of a push towards electric vehicles.

But the signals that Iramko seem to be picking up are strong.

Otherwise they would not have been able to push through those extra price hikes.

So that is quite notable.

I wonder if anything stood out to you from that conversation just about his perspective on the global oil market, his confidence, I suppose, and they're being buyers for oil going forward.

One thing that I learned was he said that because they're sitting on a three million barrel's day of extra capacity, So spare capacity every one million provides a cushion for a ten dollars drop in the price of oil, which is quite notable from a revenue perspective.

Other companies do not have that to push in any drop and prices.

For us, we do have that spare capacity that is healthy strong.

What he was trying to say is Saudi Arabia Aroundco can actually stomach slightly lower prices given how much spare capacity that they're sitting on, They'll just pump more, but at lower prices, so net net, from their perspective, it sort of adds up.

Producers do not have that additional battles to put in the market.

We do have that additional battles and it gives us strong benefit in terms of impact on our net income.

My sense was that that Wall Street's expectation is there's going to be a surplus of oil here in the second half of this year.

Maybe a dumb question, but where does Sadi Rabe, where did these other producers think that the market for this oil is going to be How confident are that they're going to be buyers for all of this oil that they're producing.

As of now, they seem to be pretty confident, unclear how this is all going to pan out in a couple of months time.

So this is a time of year where the seasonals do work in their favor.

You have global refineries operating at very high intensity, but that's expected to subside by the end of the summer.

You have high energy demands coming out of some of these Gulf nations because of the heat at this time of the year, you know, operating air conditioning units.

You have high demand for transport fuel out of some of these western nations.

So once the seasonals are out of the way, when you want to see what happens to demand.

So question of whether also some of the macro uncertainties in the air, things related to terriffs, to global economy, to China demand, the incremental fiscal boosts that you're going to get from some of these big packages that being announced, whether all of that is going to move the needle on demand as well.

Those are things that you want to think about.

Let's say you get a nuclear deal between US and Iran, does that mean you get a reduction and sanctions?

Does that mean that this mancher of maximum pressure will be released, and therefore Iranian oil, which by the way hasn't taken a big production hits, I should note, will be freer to be sold to all of these other willing buyers around the world as well.

So these are questions that we just don't know.

But you mentioned Wall Street being pretty bearish, and it's exactly because of that.

The likes of Goldman, for example, see supply growing at four times the speed of demand over the next three to four quarters.

And on the back of that, and the likes of JP Morgan City are pretty bearish on where the price of Brent gets too, and most of them have their forecast around sixty five sixty dollars by the end of this year.

OPEC plus has its next meeting on August third.

Jamana says she'll be watching for a few things, namely, will the group stay the course, will it effectively get oil production back to where it was before it imposed those cuts in twenty twenty three.

The other thing to watch out for always compliance whether or not some of those big producers, the ones that have been over producing, we'll start cutting back ultimately for the cohesion of the group, though all of these different countries.

These producers want to be producing as much as they possibly can with prices as high as they possibly can, right, and so this is the paradox for Opek.

They're trying to keep prices stable, but they also want to grab on some market share.

This is an environment where they have a lot more competition than they've ever had in history.

This is the Big Take from Bloomberg News.

I'm David Gura.

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