OPEC+ on Sunday agreed to raise its collective oil production target by a
further 188,000 barrels per day (bpd) from August.
The plan is geared towards gradually restoring supply despite ongoing
disruptions linked to the recent Middle East conflict.
The decision, announced after an online meeting of the producer alliance,
follows similar quota increases approved for June and July. Since April, the
seven core OPEC+ members have raised their production targets by almost
800,000 bpd as they unwind earlier voluntary output cuts.
However, much of the planned increase has yet to materialise because the U.S.-
Israeli war on Iran led to the closure of the Strait of Hormuz to tanker traffic,
severely limiting exports from key Gulf producers including Saudi Arabia,
Kuwait and Iraq.
As a result, OPEC+ crude production dropped sharply to 33.13 million bpd in
May from 42.77 million bpd in February, according to OPEC data. Output
began recovering in June after the United States helped facilitate oil exports
from the United Arab Emirates and other Gulf producers, although production
remains below pre-war levels.
Despite the continued supply constraints, global oil prices have retreated to pre-
war levels, weighed down by weaker Chinese crude imports, increased exports
from producers outside the Middle East and a record coordinated release of
strategic petroleum reserves by the International Energy Agency. “The group of
seven kept unwinding their production cuts as widely expected,” UBS analyst
Giovanni Staunovo said.
“The near-term focus will remain on how many tankers will manage to cross the
Strait of Hormuz and how quickly demand and Chinese crude imports recover,”
he added.
Market sentiment has also been supported by a memorandum of understanding
between Washington and Tehran aimed at ending the conflict, boosting
expectations that oil supply from the region will gradually normalise.