OPEC+ has given another oil supply release after it agreed for another modest oil quota increase for August, moving ahead with its strategy to gradually return supply to the global market as geopolitical disruptions ease.
The major group said in a statement on Sunday, adding to global supply at a time when oil prices are falling due to the gradual reopening of the Strait of Hormuz for oil exports.
The oil-producing group agreed during an online meeting to increase quotas by 188,000 barrels per day from August, on top of similar increases for June and July.
Seven core members of OPEC+, which groups OPEC and allied producers including Russia, have hiked their output quotas from April through July by almost 800,000 bpd.
Yet the increase has remained largely on paper because of the U.S.-Israeli war on Iran, which closed the Strait of Hormuz to tanker traffic for some of the most important OPEC+ members, including Saudi Arabia, Kuwait and Iraq.
OPEC+ output fell to 33.13 million bpd in May, according to OPEC data, from 42.77 million bpd in February. It began to recover in June thanks to U.S. efforts to help the UAE and other OPEC+ nations export more oil, but is still below pre-war levels.
Despite persisting supply disruptions, oil prices have returned to pre-war levels, pressured by lower Chinese imports, higher exports from non-Middle East producers, and a record global strategic stock release coordinated by the International Energy Agency.
A memorandum of understanding between Washington and Tehran to end the war has also helped convince traders that supply will ultimately return to normal levels.
Brent crude prices traded near $72 per barrel on Friday, down from recent peaks of more than $120 per barrel and back to levels traded just before the U.S. and Israel attacked Iran on February 28.
Besides agreeing production targets, OPEC+ is also facing other challenges after the United Arab Emirates left the group and Iraq signaled it wants higher quotas.
OPEC+ includes 21 members including Iran, but in recent years only the seven nations and the UAE until its departure have been involved in monthly production management.
OPEC+ output fell to 33.13 million bpd in May, according to OPEC data, from 42.77 million bpd in February.
It began to recover in June to help the UAE and other OPEC+ nations export more oil, but is still below pre-war levels.
According to Reuters, the UAE quit the alliance in late April because it wanted to align its capacity more closely with its production, free of production restraints imposed by the group.
From August, taking into account the UAE’s exit from May 1, the seven core members will still have about 379,000 bpd of the original cut to return to the market.
With the August increase now decided, they will have fully unwound the 2023 cut if they make one more hike of around the same size for September at their next meeting on August 2.
