26/06/05
Opec+ 7 to further relax output targets
Opec+ 7 to further relax output targets
London, 5 June (Argus) — Seven core Opec+ members are expected to further relax
their production targets for July when they meet on 7 June, although this will
not lead to any real output increases until the strait of Hormuz reopens. Saudi
Arabia, Russia, Iraq, Kuwait, Kazakhstan, Algeria and Oman still have about
564,000 b/d of output left to unwind from a 1.65mn b/d set of cuts agreed in
April 2023. The UAE, which left Opec and Opec+ on 1 May, was also a part of
those cuts. In their previous meeting , the seven members agreed to increase
their collective targets by 188,000 b/d for June. Should they continue to
increase their targets at this rate, the group will finish unwinding their last
remaining set of voluntary cuts by September. The decisions to increase
production targets remain something of a theoretical exercise for Saudi Arabia,
Iraq and Kuwait, which have had to shut in huge swathes of their output due to
the US-Iran war and the effective closure of the strait of Hormuz. A delegate
source says the unwinding of the cuts should be seen as a way of preparing the
ground for the three members to raise production once the strait reopens. Saudi
Arabia would be able to raise its production to 10.478mn b/d from 6.57mn b/d in
May once the cuts are fully unwound. Iraq would be able to increase to 4.431mn
b/d from 1.55mn b/d in May, while Kuwait would be allowed to boost production to
2.676mn b/d from 580,000 b/d. The source says there is a shared understanding
within the group that no member will operate at full capacity or exceed targets
to make up for lost output during the US-Iran war. Still, any output increases
from Mideast Gulf members is contingent on being able to freely export their
crude through the strait, which has remained effectively shut for more than
three months. US president Donald Trump for weeks has described a US-Iran deal
to end the war as practically finalised, although an actual agreement has proven
elusive. There are also questions about how quickly members will be able to
restore production and whether any lasting damage will result from the
shutdowns. Baseline reset The wider Opec+ alliance is also pushing full steam
ahead with a plan to update production baselines for each member that will set
new output targets from 2027, a source says. The process to assess members'
maximum sustainable production capacity is being carried out by US consultancy
DeGolyer and MacNaughton. It began in January and is set to conclude in
September, allowing three months to fine-tune targets before implementation. But
as things stand, Opec+ output remains massively curtailed. Production by all
members of the alliance rose by 50,000 b/d on the month to 29.53mn b/d in May,
according to Argus estimates (see table). This represents a 9.6mn b/d drop on
production before the start of the Iran war on 28 February. Most of this fall
has been driven by Mideast Gulf members of the alliance Saudi Arabia, Iraq,
Kuwait, Bahrain and Iran, which have collectively seen their output fall by more
than 10mn b/d from pre-war levels. The biggest rise on the month in May came
from Saudi Arabia, which boosted output by 250,000 b/d as it burnt more oil for
power generation. Iraq increased production by about 150,000 b/d, also partly to
meet increased power generation demand. Iran saw the sharpest drop last month as
the US blockade of the country's ports began to bite. Iran's output fell by
300,000 b/d to 2.65mn b/d, with further drops likely as the country's storage
sites fill up. Russia's production remained curtailed at 9mn b/d, under pressure
from continuing attacks on its oil infrastructure by Ukraine. By Aydin Calik and
Nader Itayim Opec+ crude production mn b/d May Apr* Target† ± target Opec 8
11.73 11.38 20.17 -8.44 Non-Opec 9 12.73 12.75 13.53 -0.80 Opec+ 17 24.46 24.13
33.70 -9.24 Total Opec+ 29.53 29.48 na na *revised †includes extra cuts agreed
in Apr 23 Opec wellhead production mn b/d May Apr Target† ± target Saudi Arabia
6.57 6.32 10.23 -3.66 Iraq 1.55 1.40 4.33 -2.78 Kuwait 0.58 0.56 2.61 -2.03
Algeria 0.98 1.00 0.98 -0.00 Nigeria 1.50 1.57 1.50 +0.00 Congo (Brazzaville)
0.28 0.30 0.28 +0.00 Gabon 0.22 0.19 0.18 +0.04 Equatorial Guinea 0.05 0.04 0.07
-0.02 Opec 8 11.73 11.38 20.17 -8.44 Iran 2.65 2.95 na na Libya 1.32 1.35 na na
Venezuela 1.10 1.05 na na Total Opec 11^ 16.80 16.73 na na †includes extra cuts
agreed in Apr 23 ^Iran, Libya and Venezuela are exempt from production targets
Note: UAE exited Opec on 1 May Non-Opec crude production mn b/d May Apr* Target†
± target Russia 9.00 9.00 9.70 -0.70 Oman 0.83 0.92 0.82 +0.01 Azerbaijan 0.45
0.45 0.55 -0.10 Kazakhstan 1.86 1.78 1.59 +0.27 Malaysia 0.34 0.35 0.40 -0.06
Bahrain 0.03 0.03 0.20 -0.17 Brunei 0.09 0.09 0.08 0.01 Sudan 0.01 0.01 0.06
-0.05 South Sudan 0.12 0.12 0.12 -0.00 Total non-Opec 12.73 12.75 13.53 -0.80
*revised †includes extra cuts agreed in Apr 23 Send comments and request more
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