OPEC+ announced on Sunday that it would increase its oil output by 188,000 barrels per day (bpd) for August, marking the fifth consecutive month of increases. This decision comes as global crude prices have fallen significantly from their wartime highs, returning to levels seen before the Iran conflict began on February 28. Brent crude, which peaked at over $120 per barrel during the conflict, was trading near $72 per barrel on Friday, aligning with prices before the U.S. and Israel attacked Iran.
The increase in output is attributed to reduced supply worries and falling oil prices, further supported by the gradual reopening of the Strait of Hormuz, a crucial shipping lane that was disrupted during the conflict. A U.S.-brokered memorandum of understanding between Washington and Tehran, signed on June 17, has also contributed to easing market concerns about prolonged disruptions. This agreement and a U.S. sanctions waiver allowing Iran to resume oil sales in U.S. dollars significantly reduced the geopolitical risk premium in oil prices.
The seven core members of OPEC+, which include Saudi Arabia, Russia, Iraq, Kuwait, Algeria, Kazakhstan, and Oman, are implementing the increase. Saudi Arabia will add 62,000 bpd to reach 10.4 million bpd, and Russia will also add 62,000 bpd, targeting 9.88 million bpd. Other increases include Iraq (26,000 bpd to 4.4 million bpd), Kuwait (16,000 bpd to 2.66 million bpd), Kazakhstan (10,000 bpd to 1.6 million bpd), Algeria (6,000 bpd to 1 million bpd), and Oman (5,000 bpd to 836,000 bpd).
Despite the output increase, OPEC last month lowered its oil demand outlook for 2026 for the second time, cutting it to 970,000 bpd from a previous assessment of 1.17 million bpd. The group remains confident in a "resilient" global economy despite the U.S.-Iran war. The next OPEC+ meeting is scheduled for August 2, where they may consider another increase of similar size for September to fully unwind the 2023 production cuts. The United Arab Emirates exited the alliance in late April to better align its capacity with its production without group restraints.
