Seven core members of OPEC+ agreed Sunday to raise oil output targets by 188,000 barrels per day in July, a fourth consecutive monthly increase that analysts say means little as long as the Strait of Hormuz remains closed.
Seven OPEC+ members approved a 188,000-barrel-per-day increase for July, a move analysts call largely symbolic while Gulf exports remain blocked
Andrey Rudakov / Bloomberg via Getty Images
Seven core members of OPEC+ agreed Sunday to raise oil output targets by 188,000 barrels per day in July, a fourth consecutive monthly increase that analysts say means little as long as the Strait of Hormuz remains closed.
The seven participating countries — Saudi Arabia, Russia, Iraq, Kuwait, Kazakhstan, Algeria, and Oman — said the decision reflects their commitment to oil market stability, according to an OPEC statement. The group will next meet on July 5 to decide production levels for August.
The increase is the same size as June's hike, which was adjusted down from the 206,000-barrel-per-day increases in April and May to account for the UAE's departure from OPEC, according to CNBC.
The quota increases have been impossible to act on for Gulf producers: OPEC figures show output fell to 33.19 million barrels per day in April from 42.77 million in February, a dramatic collapse driven by export disruptions. "An OPEC+ production increase means very little while the Strait of Hormuz remains closed," Rystad analyst and former OPEC official Jorge Leon said.
Friday's session saw crude shed ground to roughly $93 a barrel, reflecting growing trader expectations that a fresh U.S.-Iran military confrontation had become less probable. The session closed with Brent at $93.09 and WTI at $90.54 — both benchmarks remaining far above the roughly $72 level that prevailed before hostilities broke out.
The war between the U.S. and Iran, which began on Feb. 28, prompted Iran to close the Strait of Hormuz in retaliation — a waterway through which roughly one-fifth of the world's energy supply had previously moved, according to The Wall Street Journal. Tensions have remained elevated despite a ceasefire struck two months ago, with the two sides exchanging fire again over the weekend.
To work around the blockage, Riyadh has pushed more crude through its East-West pipeline toward Red Sea loading terminals, while the UAE has redirected a portion of its exports through a pipeline feeding the port of Fujairah, which sits beyond the strait. Even so, pipeline capacity and limited tanker crossings fall well short of substituting for unrestricted traffic through the strait, meaning the supply crunch would be considerably deeper without them.
The UAE, which left OPEC effective May 1 after nearly six decades of membership, was the cartel's third-largest producer. The exit trimmed the headline quota figures modestly and has fed ongoing uncertainty about whether OPEC can hold together as a unified force over the longer term.
On paper, the July adjustment brings the seven members to roughly nine-tenths of the way through unwinding the 2023 production cutbacks, according to Bloomberg. If increments of around 188,000 barrels per day continue through August and September, the full 2023 tranche of cuts would be formally reversed before the year's fourth quarter begins.
Join 500,000+ readers who start their day with Quartz.
By subscribing, you agree to our Terms of Service and Privacy Policy.