OPEC+ on Sunday approved another increase in oil production quotas, the fourth in as many months, despite the fact that the war between the United States and Iran continues to limit the exports of several member states.
The group decided to increase production targets by 188,000 barrels per day, starting in July, reports CNBC, quoted by News.ro.
The decision comes in a difficult context for the oil market. The conflict in the Middle East has reduced crude oil flows through the Strait of Hormuz, one of the world's most important energy routes, causing a major supply crisis. Several Gulf producers, including Saudi Arabia, have failed to fully honor their deliveries to customers since the end of February.
The OPEC+ situation was further complicated by the withdrawal of the United Arab Emirates from the Organization of the Petroleum Exporting Countries, after almost six decades of membership.
Seven key members of the alliance – Saudi Arabia, Russia, Iraq, Kuwait, Algeria, Kazakhstan and Oman – have already increased production quotas by almost 600,000 barrels per day between April and June.
In reality, however, the effective production of the group decreased significantly due to the reduction of exports from the Gulf states. According to OPEC data, average production fell to 33.19 million barrels per day in April from 42.77 million barrels per day in February.
The increase approved for July is identical to the one in June and smaller than the increases of about 206,000 barrels per day approved for April and May, the adjustment being made after the United Arab Emirates' exit from the alliance.
“An increase in OPEC+ production means very little as long as the Strait of Hormuz remains closed,” said Jorge Leon, an analyst at Rystad Energy and a former OPEC official.
He warned that, after the reopening of the maritime route, the market could quickly move from the fear of a shortage to the fear of an oil surplus.
Amid hopes that a new direct conflict between the United States and Iran is less likely, oil prices fell on Friday. Brent closed at $93.09 per barrel and US WTI oil at $90.54 per barrel. Before the outbreak of the war, the quotations were around 72 dollars per barrel.
The production increases are part of the process of phasing out the voluntary cut of 1.65 million barrels per day agreed in 2023. After the increase in July, the alliance has about 567,000 barrels per day left to return to the market from the original cut.
If the current pace is maintained in August and September, OPEC+ could fully complete the elimination of this reduction by the end of the third quarter.
In a separate meeting also held on Sunday, in which all member states of the alliance participated, the ministers decided not to change the general production policy valid until the end of 2026.
OPEC+ also continues the evaluation of the production capacities of the member states, which will form the basis of establishing the new quotas for the year 2027.
