OPEC+ agreed on the third increase in oil production quotas following the closure of the Strait of Hormuz
Kyiv • UNN
Seven OPEC+ countries will increase production by 188,000 barrels per day in June. This decision is a formality due to the blocking of exports in the Strait of Hormuz.
OPEC+ on Sunday agreed to a slight increase in oil production for June, which will remain largely formal while the war involving Iran continues to disrupt oil supplies from the Persian Gulf through the Strait of Hormuz. This was reported by Reuters, according to UNN.
Details
Seven OPEC+ countries will increase their production targets by 188,000 barrels per day in June — the third consecutive monthly increase, according to an OPEC+ statement following an online meeting. This increase is the same as the one agreed upon for May, with the exception of the share of the United Arab Emirates, which [left] on May 1.
The move is intended to show that the group is ready to ramp up supplies once the war ends, and signals that OPEC+ continues to operate as usual despite the UAE's exit, according to OPEC+ sources and analysts.
OPEC+ is sending a two-layered signal to the market: continuity despite the UAE's exit and control despite limited physical impact. While production is increasing on paper, the real impact on physical supplies remains very limited due to restrictions in the Strait of Hormuz. This is less about adding barrels and more about demonstrating that OPEC+ is still in control of the situation,
The quota for OPEC+'s top producer, Saudi Arabia, will rise to 10.291 million barrels per day in June under the agreement, which is significantly higher than actual production. According to OPEC data, the kingdom actually produced 7.76 million barrels per day in March.
The seven countries participating in Sunday's meeting were: Saudi Arabia, Iraq, Kuwait, Algeria, Kazakhstan, Russia, and Oman. Following the UAE's exit, OPEC+ consists of 21 countries, including Iran. However, in recent years, only these seven countries along with the UAE have effectively participated in monthly production decisions.
The increase is primarily symbolic until the opening of the Strait of Hormuz
The war involving Iran, which began on February 28, and the subsequent closure of the Strait of Hormuz have effectively blocked exports from OPEC+ countries — Saudi Arabia, Iraq, and Kuwait, as well as the UAE. Prior to the conflict, these producers were the only ones in the group capable of increasing production.
Even after shipping resumes through the Strait of Hormuz, it will take weeks or even months for supplies to return to normal levels, according to regional oil executives and global traders.
Supply disruptions have pushed oil prices to a four-year high of over $125 per barrel, and analysts predict a possible shortage of jet fuel within one to two months and rising global inflation.
Total oil production for all OPEC+ countries in March averaged 35.06 million barrels per day, which is 7.70 million barrels less than in February, OPEC reported in last month's report, noting the largest cuts in Iraq and Saudi Arabia due to export restrictions.
The next meeting of the seven OPEC+ countries is scheduled for June 7, the statement said.