OPEC+ has decided to raise its oil production targets once again, agreeing to increase output quotas by 188,000 barrels per day (bpd) from August as the group continues to unwind earlier production cuts, according to Business Today. The decision, taken during an online meeting, comes after similar quota increases for June and July.
August Output Hike and Unwinding of Cuts
Between April and July, the seven core members of OPEC+ — Saudi Arabia, Russia, Iraq, Kuwait, Algeria, Kazakhstan, and Oman — have raised their production quotas by nearly 800,000 bpd, Business Today reported. These producers have been rolling back the 1.65 million bpd production cut agreed in 2023.
| Metric | Value | Source |
|---|---|---|
| OPEC output in February | 42.77 million bpd | Business Today |
| OPEC output in May | 33.13 million bpd | Business Today |
| August quota increase | 188,000 bpd | Business Today |
| Cumulative increase (Apr-Jul) | ~800,000 bpd | Business Today |
| 2023 cut to be unwound | 1.65 million bpd | Business Today |
| Remaining cut after August | ~379,000 bpd | Reuters calculations |
Supply Disruptions and Production Data
Even so, the additional supply has largely remained unrealised because the US-Israeli war on Iran disrupted exports after tanker traffic through the Strait of Hormuz was halted, according to Business Today. The closure affected several major OPEC+ producers, including Saudi Arabia, Kuwait, and Iraq. Production data from OPEC showed the group's output fell to 33.13 million bpd in May from 42.77 million bpd in February. Although production started improving in June following US efforts to help the UAE and other OPEC+ countries export more oil, output has yet to return to levels seen before the conflict.
Price Retreat and Demand Factors
While supply disruptions persist, oil prices have already retreated to pre-war levels. The decline has been driven by weaker crude imports from China, higher exports from producers outside the Middle East, and a record coordinated release of strategic oil reserves by the International Energy Agency (IEA), Business Today reported. Brent crude settled near $72 a barrel on Friday, a sharp fall from recent highs of more than $120 a barrel. Prices have returned to the levels seen before the US and Israel launched their attack on Iran on February 28.
"The group of seven kept unwinding their production cuts as widely expected," UBS analyst Giovanni Staunovo told Reuters, as quoted by Business Today. "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."
Geopolitical Developments and OPEC+ Dynamics
Market sentiment has also been supported by a memorandum of understanding between Washington and Tehran aimed at ending the war, reinforcing expectations that oil supplies will eventually normalise, according to Business Today. Apart from production policy, OPEC+ is also navigating changes within the alliance. The United Arab Emirates has exited the group, while Iraq has indicated that it is seeking higher production quotas. The UAE withdrew from OPEC+ in late April, saying it wanted production to reflect its capacity without being constrained by the group's output limits. According to Reuters calculations, after accounting for the UAE's exit from May 1, the seven remaining core producers will still have around 379,000 bpd of the original cut left to restore from August.
Outlook and Key Dates
If they agree to another increase of roughly the same size at their next meeting on August 2, the 2023 production cut will have been fully reversed by September, Business Today reported. The near-term focus for traders remains on tanker crossings through the Strait of Hormuz and the pace of demand recovery, particularly from China.
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