OPEC+ Raises August Production Target By 188,000 BPD

OPEC+ has agreed to a further increase in oil production targets from August, the group said in a statement on Sunday, adding to global supply as oil prices ease and exports through the Strait of Hormuz continue to recover, Reuters reported.

The oil-producing group agreed during an online meeting to increase production quotas by 188,000 barrels per day (bpd) from August, on top of similar increases approved for June and July.

The seven core members of OPEC+ — which comprises OPEC members and allied producers, including Russia — have increased their output quotas from April through July by almost 800,000 bpd.

However, much of that increase has remained on paper because the US-Israeli war with Iran disrupted tanker traffic through the Strait of Hormuz, affecting exports from key OPEC+ producers, including Saudi Arabia, Kuwait and Iraq.

OPEC+ output fell to 33.13 million bpd in May, according to OPEC data, down from 42.77 million bpd in February.

Production began to recover in June as exports through the Strait of Hormuz resumed, although output remains below pre-war levels.

Despite ongoing supply disruptions, oil prices have returned to pre-war levels, weighed down by weaker Chinese imports, higher exports from producers outside the Middle East, and a record coordinated release of strategic oil 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 manage to cross the Strait of Hormuz and how quickly demand and Chinese crude imports recover.”

A memorandum of understanding between Washington and Tehran aimed at ending the conflict has also helped convince traders that supplies will eventually return to normal.

Brent crude traded near $72 a barrel on Friday, down from recent highs of more than $120 a barrel and back to levels seen before the US and Israel launched strikes on Iran on February 28.

Beyond production targets, OPEC+ is also facing internal challenges after the United Arab Emirates left the alliance and Iraq signalled it wants a higher production quota.

OPEC+ comprises 21 members, including Iran, although in recent years only seven countries — and the UAE before its departure — have participated in monthly production management.

Those seven producers — Saudi Arabia, Russia, Iraq, Kuwait, Algeria, Kazakhstan and Oman — are increasing output as part of the phased rollback of a 1.65 million bpd production cut agreed in 2023, when the UAE was still a member.

The UAE withdrew from the alliance in late April, saying it wanted to align production more closely with its capacity without the constraints imposed by the group.

From August, after accounting for the UAE’s exit on May 1, the seven remaining core members will still have around 379,000 bpd of the original production cut left to restore to the market, according to Reuters calculations.

With the August increase now agreed, the group is on track to fully unwind the 2023 production cut if it approves another increase of roughly the same size at its next meeting on August 2.