By Robert Harvey, Ahmad Ghadar, and Seher Darin

LONDON, Aug 7 (Reuters) - OPEC+ took advantage of a summer surge in demand to launch its first production increases in three years, but those targets proved difficult to achieve, leaving the market unexpectedly undersupplied.

The alliance is the world's largest group of oil-producing countries and includes the Organization of the Petroleum Exporting Countries (OPEC) and allies led by Russia.

Theoretically, the alliance is expected to pump an additional 2.5 million barrels of oil per day in September compared to March, but data indicates this is unlikely.

This is due to two factors: some countries are finding it difficult to pump more oil, while others are receiving instructions from OPEC+ to curb production as punishment for exceeding their previously set quotas.

"Iraq, and to a lesser extent Russia, have been overproducing in the past, and Kazakhstan was already producing at full capacity in March," said Jorge Leon, a former OPEC official who is now head of geopolitical analysis at Rystad Energy.

"Therefore, increasing quotas does not necessarily mean increasing production," he added.

While it might have been expected that month-on-month production increases would lead to lower oil prices, Brent crude futures have risen to around $68 per barrel from their 2025 low of $58 in April.

It is also noteworthy that spot oil prices are now higher than prices for the next six months.

Richard Price, an analyst at Energy Aspects, said the current price increase is justified because higher refinery throughput and summer demand from Middle Eastern power plants are absorbing the OPEC+ increases.

"The market is still suffering from a shortage of supply at the moment," he added.

Front-month Brent futures were trading at the beginning of this month at a $2.74 premium to contracts for delivery within six months. However, by early May, they were trading at a small discount and at their lowest level since 2025.

In addition to the growing demand in the Middle East for air conditioning in the summer, China is increasing its stockpiles.

According to the International Energy Agency, China's crude oil inventories rose by 82 million barrels, or nearly 900,000 barrels per day, in the second quarter.

"Chinese oil demand has been better than many expected at the beginning of the year," said Giovanni Staunovo, an analyst at UBS. "Chinese storage activity has also played a role in supporting crude oil prices."

The OPEC+ increases also come at a time when inventories in developed OECD countries are declining, as a result of previous OPEC+ cuts, a trend that is supporting prices.

"Over the past three years, crude oil inventories in OECD countries have remained low, particularly in the United States," said Homayoun Falakshahi, an analyst at Kpler.

According to OPEC data published in July, European oil inventories fell by about 9 percent below their five-year average of 394 million barrels in May, while US commercial crude inventories in June were also below their five-year average of 419 million barrels.

OPEC+ officials pointed to these low levels as evidence that the market needs to increase the alliance's oil production.

* 8 countries in OPEC+

OPEC+ has imposed various production restrictions since the COVID-19 pandemic led to a decline in demand, forcing producers to cut oil production that no one wanted.

The group began easing its cuts in April, including only eight member states: Saudi Arabia, Russia, Iraq, the UAE, Kazakhstan, Kuwait, Oman, and Algeria.

From April to June, these countries pledged to increase production by approximately 960,000 barrels per day, equivalent to a net 730,000 barrels per day including the required cuts, but OPEC data shows they only achieved an increase of 540,000 barrels per day.

Production data also show that Saudi Arabia alone contributed more than 70 percent of the net increase.

According to data from analytics firm Vortexa, exports rose by only about 460,000 barrels per day from March levels, while global demand grew by about 1 million barrels per day, according to the International Energy Agency.

Vortexa data showed that Saudi Arabia contributed to virtually all of this increase, with its exports rising by 631,000 barrels per day from March to June, while shipments from Russia, Iraq, Kazakhstan, Kuwait, and Oman declined. Saudi Arabia acknowledged exceeding its June quota, but explained that a significant portion of this volume went into its domestic and international storage.

Gulf producers' exports typically decline during the summer months due to increased demand for air conditioners.

"The market is signaling that supply is tight," said a veteran oil trader, speaking about current crude prices. "OPEC announcements should lead to increased exports, and when we see exports, the market will begin to correct."

* Goals vs. Reality

To the extent that the current gap reflects limited production capacity outside Saudi Arabia and the UAE, Russia, for example, has struggled to cope with Ukrainian attacks on its energy infrastructure.

However, OPEC+ member countries continue to seek higher quotas at their monthly meetings to set production levels, even if immediate delivery is an issue, so that they can exploit this additional increase in the future if actual production capacity increases or the OPEC+ alliance requests new cuts.

On August 3, the OPEC+ alliance agreed to a new production increase for September, while restrictions imposed on some members due to previous overproduction are scheduled to continue until next June. The total monthly reduction ranges from approximately 200,000 to 500,000 barrels per day.

"As in previous months, I expect actual production volume increases to come in below quota increases," said UBS's Staunovo.

The eight OPEC+ countries aim to increase production to 32.36 million barrels per day by September, compared to 30.80 million barrels per day in March.

(Prepared by Mahmoud Reda Murad for the Arabic edition - Edited by Soha Gado)