Source Credit : Portfolio Prints
OPEC+ has agreed to raise its oil production targets again from August, continuing its gradual rollback of voluntary supply cuts despite weaker crude prices and ongoing geopolitical uncertainty. The decision, announced in a statement following the group's online meeting on Sunday, comes as the reopening of the Strait of Hormuz has eased concerns over major supply disruptions and added to global oil availability.
The alliance approved an increase of 188,000 barrels per day (bpd) for August, matching the production hikes implemented in June and July. Since April, the seven core members responsible for managing OPEC+ output have collectively increased their quotas by nearly 800,000 bpd as part of the phased reversal of production cuts introduced in 2023.
However, much of the planned increase has yet to materialize. The U.S.-Israeli conflict with Iran disrupted exports after tanker traffic through the Strait of Hormuz—a critical shipping route for major producers such as Saudi Arabia, Kuwait, and Iraq—was temporarily halted. As a result, actual OPEC+ production remained well below target levels.
According to OPEC data, the group's output fell sharply to 33.13 million bpd in May, down from 42.77 million bpd in February. Production began recovering in June after U.S.-led efforts helped facilitate exports from the UAE and other Gulf producers, although total output remains below pre-conflict levels.
Despite lingering supply disruptions, oil prices have retreated significantly. Brent crude traded near $72 per barrel on Friday, down from peaks above $120 per barrel during the conflict and close to levels seen before the U.S. and Israel launched strikes against Iran on February 28. Prices have been weighed down by weaker Chinese crude imports, rising exports from producers outside the Middle East, and a record coordinated release of strategic petroleum reserves by the International Energy Agency.
"The group of seven kept unwinding their production cuts as widely expected," UBS analyst Giovanni Staunovo said. "The near-term focus will remain on how many tankers manage to transit the Strait of Hormuz and how quickly demand, particularly from China, recovers."
Investor sentiment has also improved following a memorandum of understanding between Washington and Tehran aimed at ending the conflict, reinforcing expectations that Middle Eastern oil supplies will gradually normalize.
Beyond production policy, OPEC+ is navigating growing internal challenges. The alliance recently lost the United Arab Emirates as a member after Abu Dhabi withdrew to pursue production levels more closely aligned with its expanding capacity. Meanwhile, Iraq has also indicated that it wants higher production quotas.
Although OPEC+ consists of 21 member countries, only seven producers—Saudi Arabia, Russia, Iraq, Kuwait, Algeria, Kazakhstan, and Oman—currently oversee the alliance's monthly production adjustments. These countries are implementing the phased reversal of the 1.65 million bpd voluntary supply cut agreed in 2023, when the UAE was still part of the group.
Following the UAE's departure on May 1, Reuters estimates that the remaining seven producers will still have approximately 379,000 bpd of the original cut left to restore after the August increase. If OPEC+ approves another increase of a similar size at its next meeting on August 2, the alliance will have effectively completed the unwinding of the 2023 production cuts by September.
