OPEC+ Poised to Boost Oil Output as Global Supply Rebounds
LONDON, July 5 (Reuters) – OPEC+, the influential oil-producing alliance, is expected to agree on Sunday another increase in output targets from August, adding to the global supply as oil prices continue to fall due to a gradual reopening of the Strait of Hormuz for oil exports.
Source: s.yimg.com
According to sources with knowledge of the matter, the oil-producing group has agreed in principle to increase quotas by 188,000 barrels per day from August, on top of similar increases for June and July. This decision comes as the group’s seven core members, including Saudi Arabia, Russia, Iraq, Kuwait, Algeria, Kazakhstan, and Oman, have already increased their output quotas from April through July by almost 800,000 barrels per day.
Source: s.yimg.com
Despite the recent increase in output, OPEC+ production still remains below pre-war levels. In May, OPEC+ output fell to 33.13 million bpd, down from 42.77 million bpd in February. However, thanks to U.S. efforts to help the UAE and other OPEC+ nations export more oil, production began to recover in June.
The memorandum of understanding to end the war has also helped convince traders that supply would ultimately return to normal levels. Brent crude prices have traded near $72 per barrel on Friday, down from recent peaks of more than $120 per barrel.
Moreover, OPEC+ is facing other challenges, including the UAE’s departure from the group in late April and Iraq’s signal that it wants higher quotas. The seven producers are boosting output as part of the phased rollback of a 1.65 million bpd supply cut agreed in 2023, when the group still included the UAE.
From August, the seven have about 379,000 bpd of the original cut to return to the market, taking into account the UAE’s exit from May 1. This would mean that the group would unwind the remainder of the cut by the end of September if they continue increases at the same pace.
The increase in output is likely to put pressure on oil prices, which have already been affected by lower Chinese imports, higher exports from non-Middle East producers, and a record global strategic stock release coordinated by the International Energy Agency.
OPEC+ has been increasing its output in recent months as part of a phased rollback of a 1.65 million bpd supply cut agreed in 2023. The group’s output has been affected by the U.S.-Israel war on Iran, which closed the Strait of Hormuz for passage of tankers from some of the most important OPEC+ members, including Saudi Arabia, Kuwait, and Iraq.
The increase in output is expected to add to the global supply as oil prices continue to fall due to a gradual reopening of the Strait of Hormuz for oil exports.
OPEC+ is set to agree on Sunday another increase in output targets from August, adding to the global supply amid falling oil prices due to a gradual reopening of the Strait of Hormuz for oil exports.
