OPEC+ has agreed to raise its oil output for a third consecutive month, adding a further 188,000 barrels a day from August as shipping through the Strait of Hormuz slowly recovers from the war on Iran.
The decision was taken on Sunday at a virtual meeting of the seven core members still managing production together: Saudi Arabia, Russia, Iraq, Kuwait, Kazakhstan, Algeria and Oman. It matches the increases agreed for June and July.
The group has been unwinding a cut of 1.65 million barrels a day agreed in 2023, when the alliance still included the United Arab Emirates. The Gulf state left in late April to bring its quota into line with its production capacity, leaving the remaining seven to manage the phased rollback.
Those increases have added almost 800,000 barrels a day to quotas between April and July, according to Reuters, close to 1 per cent of world demand. Much of it has remained on paper.
The war on Iran, which began on February 28 with US and Israeli strikes, closed the Strait of Hormuz to tanker traffic and stopped several Gulf producers lifting their exports.
Oil has since fallen back to pre-war levels. Brent crude has returned to around $72 a barrel in London after a memorandum of understanding between Washington and Tehran convinced traders that supply would return to normal.
The reopening of the strait, weaker Chinese imports and a coordinated release of strategic reserves by the International Energy Agency have all weighed on prices. Some analysts warn the group could soon face a choice between defending prices and fighting for market share, raising the prospect of a price war.
The seven producers reaffirmed the importance of “adopting a cautious approach and retaining full flexibility” to increase, pause or reverse the increases as conditions change. They said the meeting would also let members speed up compensation for oil produced above their quotas.
UBS analyst Giovanni Staunovo said the seven “kept unwinding their production cuts as widely expected”. He said the immediate focus would stay on how many tankers managed to cross the Strait of Hormuz and how quickly demand recovered.
One more increase of similar size in September would fully unwind the 2023 cut. The seven are due to meet again on August 2.
