The surprising production increase by the Organization of the Petroleum Exporting Countries (OPEC) signals a significant shift in supply policy, which is likely to weigh on prices for the foreseeable future, according to a Thursday note by ANZ Research.

The analysts maintained their short-term price target of $55 per barrel of oil. However, risks remain firmly skewed to the downside.

OPEC has surprised the market with another acceleration of its planned production hikes.

They declared an increase in planned production hikes in May and June to 411,000 barrels of oil per day. The decision to boost output was based on issues, including the oil market being broadly balanced in the first quarter, with inventories relatively low. It may also have been in response to impending supply disruptions due to rising geopolitical risks.

The analysts now put a higher probability on OPEC+ fully unwinding the headline 2.2 million barrels per day cuts by the end of the year.

Actual cuts are also not as large as headline cuts, given undercompliance and capacity constraints. There is very little spare capacity outside Saudi Arabia, UAE, Kuwait, Oman, and Russia, it noted.

Saudi Arabia appears to be prioritizing higher production levels. It also appears to be becoming less tolerant of overproducing members. US supply has peaked for the year and is likely to edge lower in the second half of the year.