OPEC+ holds output policy unchanged, July hike of 188,000 bpd set

OPEC+ kept its group-wide oil production policy unchanged at a ministerial meeting Sunday, even as seven core members push ahead with a 188,000 barrel-per-day output increase for July — the fourth such hike in as many months.

"An OPEC+ production increase means very little while the Strait of Hormuz remains closed," said Jorge Leon, an analyst at Rystad and a former OPEC official. "When the Strait of Hormuz reopens, the market could move very quickly from fear of shortage to fear of surplus."

The U.S. war with Iran has cut oil flows through the Strait of Hormuz since late February, creating what analysts describe as the world's biggest-ever supply crisis. Key OPEC+ members including Saudi Arabia have been unable to supply customers in full, while the United Arab Emirates exited the Organization of the Petroleum Exporting Countries after almost six decades — a move that took effect May 1 and further reduced the group's effective capacity.

The disconnect between quota increases and actual production has widened dramatically. OPEC data shows the group's output averaged 33.19 million bpd in April, down from 42.77 million bpd in February — a collapse of more than 9 million bpd driven largely by Gulf export restrictions. The seven countries raising quotas — Saudi Arabia, Iraq, Kuwait, Algeria, Kazakhstan, Russia and Oman — have added almost 600,000 bpd of target increases from April through June, but actual barrels reaching the market remain constrained.

Brent crude settled at $93.09 a barrel Friday, down $1.94, while U.S. West Texas Intermediate finished at $90.54, down $2.50. Prices have climbed from around $72 before the war began, though Friday's decline reflected growing trader confidence that renewed U.S.-Iran conflict was becoming less likely.

The July increase is part of the gradual unwinding of a 1.65 million bpd production cut the group agreed to in 2023. From July, the seven members have about 567,000 bpd of that original cut left to return to the market, according to Reuters calculations. If OPEC+ maintains monthly hikes of roughly 188,000 bpd through August and September, the remainder of the cut would be fully unwound by the end of September.

The broader OPEC+ ministerial meeting, which includes all 21 members, was not expected to make any changes to group-wide output policy, OPEC+ sources said earlier Sunday. The group scheduled its next ministerial meeting for Nov. 29.

The stakes for global oil markets remain unusually high. Before the Hormuz closure, OPEC+ was managing a relatively predictable unwind of pandemic-era cuts. Now, the group faces a scenario where nominal quota increases bear little relation to actual supply — a dynamic that could trigger a rapid price correction if the strait reopens and stored barrels flood back into the market. The last time a major chokepoint disruption of this scale occurred, during the 2019 Abqaiq-Khurais attacks on Saudi facilities, prices spiked 15 percent in a single session before normalizing within weeks as spare capacity was deployed.

This article is for informational purposes only and does not constitute investment advice.