Opec+ poised to raise output as supply fears ease

• Likely increase of 188,000 bpd
• Brent almost at pre-war price
• UAE exporting record 3.7m bpd

The Organization of the Petroleum Exporting Countries (Opec) and its allies are likely to raise production quotas for a fourth month in a row when they hold a virtual meeting on Sunday.

Oil prices have fallen to their lowest since the Iran war began on February 28 and shipping traffic through the Strait of Hormuz has picked up.

Seven core members of the Opec+ alliance – Opec plus a number of non-Opec producers led by Russia – are set to approve an increase of around 188,000 barrels per day for August, three sources told Reuters. This would match the rises agreed for June and July.

The seven countries – Saudi Arabia, Russia, Iraq, Kuwait, Algeria, Kazakhstan and Oman – are gradually unwinding voluntary production cuts of 1.65 million bpd agreed in 2023.

Reports suggest Iraq, Opec’s second-biggest producer, is pushing for a higher quota.

The UAE left Opec and Opec+ in April. The country’s exports hit a record-high 3.7 million bpd in June, according to data from Kpler reported by Reuters.

Sunday’s meeting comes as oil markets continue to recover from disruption caused by the Iran war, which led to the virtual closure of the Strait of Hormuz for months.

Brent crude, the global benchmark, was trading at around $72 a barrel on Friday – roughly pre-war levels. Prices reached a high of $126 a barrel at the end of April, but fears of a much sharper rise never materialised.

Before the conflict, around a fifth of global oil supplies transited the strait each day – about 20 million barrels. In May this fell to below 10 million, according to the International Energy Agency (IEA).

Oman and Iran are advancing competing proposals for the future management of the strait.

Muscat and Tehran have different visions for overseeing navigation through the strategic waterway as commercial shipping rapidly returns, maritime news publication Lloyd’s List said.

It said more vessels travelled through the strait in the final two weeks of June than in the previous month and a half combined.

The market is expected to return to surplus by year-end as Middle Eastern exports recover, the IEA said last month.

It added that robust production growth in the Americas, together with releases from the US Strategic Petroleum Reserve, had boosted crude exports east of Suez by 3.5 million bpd since the start of the conflict, helping to offset lower Gulf supplies.

• Bullish Opec says annual $700bn needed to meet oil demand
• Kuwait faces energy reckoning after Hormuz crisis
• US waiver on Iranian oil may spark regional price scramble

Norbert Rücker, head of economics and next-generation research at Swiss bank Julius Baer, said the focus had shifted from concerns over supply disruptions to the prospect of abundant production.

“The oil market is moving forward rapidly into its new-old normal, characterised by ample supplies and producer competition,” Rücker said.

He added that improving tanker flows through the Strait of Hormuz suggested “the market balance has likely moved from a deficit to a surplus”.