‘Removing paper cuts’: Commodities expert on OPEC+ announcing output hike

Daniel Ghali, senior commodity strategist at TD Securities, joins BNN Bloomberg to discuss the latest on gold and provide a recap for of the latest OPEC+ meeting.

After the Organization of the Petroleum Exporting Countries (OPEC) announced a modest production boost of crude to global markets in October, a commodities expert says the cartel is attempting to regain market share as it scales back voluntary cuts to oil.

OPEC, as well as Russia and other allies (OPEC+), said on Sunday it plans to raise the global output target by 137,000 barrels per day (bpd) for a total of 1.65 million barrels in October as leader Saudi Arabi pushes to regain market share.

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“The way I see it is that they’re providing assurance” Daniel Ghali, senior commodity strategist at TD Securities, told BNN Bloomberg in an interview Monday. “What they’re doing is removing paper cuts from the market. There is a massive amount of barrels that are on paper being withheld from supply, but in reality, most countries don’t have the ability to bring those barrels back.”

The increase is much lower than the monthly increase of 548,000 bpd for July, and 411,00 bpd in June and May. Brent crude rose to US$66.52 a barrel Monday while West Texas Intermediate (WTI) sold for US$62 a barrel on the Intercontinental Exchange. The increase follows threats from U.S. President Donald Trump to sanction Russia for its continuation of the war with Ukraine.

The eight-member group controls more than 40 per cent of global oil output. They have been increasing production since April after years of cuts to support the oil market. Ghali said the removal of “paper cuts” will have minimal impact on barrels hitting the market as most OPEC+ countries have limited spare capacity.

Only Saudi Arabia and the United Arab Emirates will have the ability to bring meaningful barrels to the market, he said. The move is widely viewed as adjusting production targets rather than significantly increasing global oil supply.

“When you take into account the fact that most countries therein have very limited spare capacity, this move effectively only grants Saudi Arabia and the UAE and some marginal barrels thereafter, the ability to bring more barrels to the market.”

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The organization said it retained options to accelerate, pause or reverse hikes at future meetings. It scheduled the next meeting of the eight countries for Oct. 5.

“I actually think that the signal that OPEC is providing is one where they’re not afraid to bring barrels back to the market,” said Ghali. “They’re perhaps emboldened by the fact that oil prices have not fallen significantly since they’ve resumed bringing barrels back to the market, but this is actually quite a negative signal from an energy market perspective. The silver lining, I think, is that the headline number that they’re giving 137,000 barrels a day is significantly overstating the amount of barrels that are actually going to hit the market.”

He said the market is going to have to start considering that global spare capacity is beginning to get stretched. He expects that theme to come into play over the course of 2026.

With files from Reuters