OPEC+ members voted June 7 to raise output targets by 188,000 barrels per day starting in July, their fourth consecutive monthly increase, into a market most of them still cannot physically reach.
The Strait of Hormuz has been effectively blockaded by Iranian forces since early March, following U.S. and Israeli strikes on Iran that began in late February. The IEA has called the closure the largest supply disruption in the history of the global oil market.
Around 20% of the world’s petroleum trade once flowed through the strait.
OPEC’s own figures show the bloc’s combined output collapsed from roughly 42.77 million bpd in February to just 33.19 million bpd in April, with nearly 9.58 million bpd wiped out in two months. This of course means that the quotas being lifted exist, for now, largely on paper.
“An OPEC+ production increase means very little while the Strait of Hormuz remains closed,” said Jorge Leon, analyst at Rystad Energy and former OPEC official.
Saudi Arabia, Russia, Iraq, Kuwait, Kazakhstan, Algeria, and Oman are all party to Saturday’s virtual decision. Together they have now lifted targets by nearly 600,000 bpd across the April to June period, gradually unwinding a 1.65 million bpd cut first agreed to in 2023.
The structural backdrop has already shifted once. The UAE exited OPEC+ on May 1, after nearly six decades of membership. The departure trimmed the per country monthly increment from 206,000 bpd to the current 188,000 bpd and has raised broader questions about the alliance’s cohesion.
In their joint statement, the seven nations said they retain “full flexibility to increase, pause or reverse” the phase-out of voluntary cuts, and noted the July adjustment could be returned in part or in full depending on market conditions.
The seven members meet again on July 5.
Information for this story was found via the sources and companies mentioned. The author has no securities or affiliations related to the organizations discussed. Not a recommendation to buy or sell. Always do additional research and consult a professional before purchasing a security. The author holds no licenses.
