OPEC

The price for a barrel of Brent crude oil for October delivery lost 5.16% to $83.39 a barrel, while US crude, or WTI, futures for September delivery declined nearly 6% to $79.66 per barrel.

Crude declined after US President Donald Trump said fresh talks with Iran would begin later in the day, easing concerns over potential supply disruptions. Additional downward pressure came after Saudi Arabia, Russia and five other key members of OPEC+ agreed in an online meeting on Sunday to boost oil production by 188,000 barrels a day from September, against a backdrop of disruption caused by the Middle East conflict.

“The seven participating countries decided to implement a production adjustment of 188 thousand barrels per day,” they said in a joint statement.

The increase, decided by the key countries in the enlarged Organisation of the Petroleum Exporting Countries, was widely expected by analysts.

“OPEC+ has finished unwinding its voluntary cuts. The next challenge is managing the surplus that could emerge as export flows normalise,” Jorge Leon, analyst at Rystad Energy, said.

He warned, however, that the decision “changes little in the near term because (the Strait of) Hormuz remains constrained. The real market impact will come when normal export flows resume.”

The Gulf countries have struggled to increase exports due to the near-paralysis of the Strait of Hormuz orchestrated by Iran during the war in the Middle East – despite a brief upswing in shipping traffic after a US-Iran memorandum of understanding was signed in June.

Many OPEC+ members cannot produce as much oil as their official targets allow due to a “decline in production capacity”, so increasing targets has become less meaningful, Giovanni Staunovo, an analyst at UBS, said.

Future pause foreseen

The September increase, agreed by OPEC+ countries Saudi Arabia, Russia, Iraq, Kuwait, Kazakhstan, Algeria, and Oman, completes the unwinding of the second of the three production-cut packages introduced by organisation.

“Having completed the restoration campaign, OPEC+ has little incentive to rush into further supply changes. Our base case is a fourth-quarter pause while the group prepares for the 2027 quota negotiations,” Rystad Energy’s Leon said.

“For now, geopolitics is masking the scale of the supply increase. That will become much clearer once export flows normalise,” he added.

It remains unclear when the group will actually be able to increase its oil volumes. Some member countries, such as Iraq, have expressed a desire to significantly boost production.

Russia, though, is confronted with repeated Ukrainian drone attacks on its oil infrastructure that have crimped production, currently hovering around nine million barrels per day – compared with a target of 9.8 million barrels per day.

OPEC+ “faces potentially difficult talks over new production quotas” starting next year following the September increase, according to analysts at DNB Carnegie.

Between late 2022 and 2023, OPEC+ became concerned that oil prices were falling, and agreed to cut oil production in three separate rounds, reducing total output by nearly six million barrels per day.

But Saudi Arabia, Russia, Iraq, Kuwait, Kazakhstan, Algeria, Oman and the United Arab Emirates – before the latter’s exit from the group on May 1 – then changed their strategy by gradually upping production starting in 2025.

“I don’t think cohesion is at risk at this very moment,” Leon said, warning, however, that the UAE’s withdrawal from the group in May has highlighted a weakness in this area.

NewsFeed

Analyst Alexandru Hudisteanu warns that Iran’s overuse of Strait of Hormuz as leverage could transform the strategic chokepoint from a deterrence tool into an instrument of extortion, potentially turning the country into an international pariah.

OPEC on Sunday announced that its member nations will increase oil production by nearly 200,000 barrels per day in July, despite the Strait of Hormuz remaining closed and it being very difficult to ship it anywhere out of the Middle East. Photo by Ismael Mohamad/UPI | License Photo

June 7 (UPI) — The Organization of the Petroleum Exporting Countries on Sunday agreed to increase production by nearly 200,000 barrels per day despite the Strait of Hormuz remaining closed, making it near-impossible to ship any of it.

Ordinarily, OPEC increasing oil production among the group of nations that comprise it would lower its cost, but experts have called the move largely symbolic because of the ongoing war in Iran, The New York Times and Wall Street Journal reported.

The Strait of Hormuz, which 20% of the world’s oil supply ordinarily would pass through daily, has been closed since early in the war as part of Iran’s effort to counter the war launched by the United States and Israel in February.

The OPEC members that agreed to the 188,000-barrel increase for July — the fourth month in a row that the group is increasing production — include Saudi Arabia, Russia, Iraq, Kuwait, Algeria, Kazakhstan and Oman.

The countries agreed to the increase as part of the group’s “commitment to support oil market stability” and said the latest production increase would also allow the participating nations to “accelerate their compensation,” OPEC said in a statement.

“The countries will continue to closely monitor and assess market conditions, and in their continuous efforts to support market stability, they reaffirmed the importance of a cautious approach,” the group said in the statement.

The Trump administration continues to negotiate an end to the war that would lead to the reopening of the Strait, in addition to working to limit Iran’s ability to build a nuclear weapon, amid a shaky weeks-long cease-fire.

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Qatar’s Deputy Prime Minister Sheikh Saoud bin Abdulrahman bin Hassan bin Ali Al Thani has told the Shangri-La Dialogue that his country would oppose a permanent toll for passage through the Strait of Hormuz.

He added that Qatar would find a temporary fee negotiable, if it was to be used to help reopen the waterway, by removing sea mines, for example.