The Organisation of the Petroleum Exporting Countries and allies (OPEC+) agreed to another modest oil output hike for June, which will remain largely on paper as long as the war in Iran continues to disrupt Gulf oil supplies through the Strait of Hormuz.
Seven OPEC+ countries will raise oil output targets by 188,000 barrels per day in June, the third consecutive monthly increase, OPEC+ said in a statement after an online meeting on Sunday.
The increase is the same as that agreed for May, minus the share of the United Arab Emirates (UAE), which exited the alliance on May 1 to focus on its energy future.
The seven members who met on Sunday were Saudi Arabia, Iraq, Kuwait, Algeria, Kazakhstan, Russia, and Oman. With the UAE leaving, OPEC+ includes 21 members, including Iran and Russia. However, in recent years, only the seven nations plus the UAE have been involved in monthly production decisions.
The move is designed to show the group is ready to raise supplies once the war stops.
The Iran war, which began on February 28, and the resulting closure of the Hormuz Strait have throttled exports from OPEC+ members Saudi Arabia, Iraq and Kuwait, as well as from the UAE. Before the conflict, these producers were the only countries in the group able to raise production.
Top OPEC+ producer Saudi Arabia’s quota will rise to 10.291 million barrels per day in June under the agreement, far above actual production. The kingdom reported actual production of 7.76 million barrels per day to OPEC in March.
Market analysts noted that even when shipping through the Strait of Hormuz reopens, it will take several weeks or months for flows to normalise.
In the meantime, the supply disruption has propelled oil prices to a four-year high above $125 per barrel.
Crude oil output from all OPEC+ members averaged 35.06 million barrels per day in March, down 7.70 million barrels per day from February, OPEC said in a report last month, with Iraq and Saudi Arabia making the biggest cuts due to constrained exports.
The seven OPEC+ members will meet again on June 7.
