Major OPEC+ members, specifically seven nations including Saudi Arabia and Russia, have agreed to another modest, symbolic increase in their oil output quotas for July. This decision will raise their collective target by 188,000 barrels per day. This marks the second consecutive monthly increase of this amount, following a similar adjustment for June.
The agreement continues the process of gradually restarting production that was halted several years ago. This move comes even though a blockage of exports from the Persian Gulf due to geopolitical issues prevents most of these nations from fully implementing the increase. The ongoing normalisation of shipping lanes in the Middle East, particularly the Strait of Hormuz, is expected to allow for a gradual return to normal output levels, with a significant pickup anticipated in August.
The increased quotas are part of a broader strategy by OPEC+ to unwind production cuts at a consistent pace. However, analysts like Giovanni Staunovo from UBS note that current production levels are likely still below the group's targets. The group remains committed to achieving full conformity with the Declaration of Cooperation, with Saudi Arabia and Russia each increasing output by 62,000 barrels per day, Iraq by 26,000 bpd, Kuwait by 16,000 bpd, Kazakhstan by 10,000 bpd, Algeria by 6,000 bpd and Oman by 5,000 bpd. The compensation period for any overproduced volumes has been extended until December 2026.
While the current increases are symbolic given the export challenges, the long-term outlook suggests a potential surplus next year. Countries that tapped into inventories during the recent conflict are expected to absorb initial flows, but producers may face downward price pressure later on. The coherent management of these shifting market dynamics remains crucial for OPEC+, especially after the departure of the United Arab Emirates from the group in May.
