Opec+ crude production staged a partial recovery in June, but the gains are at risk as renewed fighting between the US and Iran threatens to cripple exports through the strait of Hormuz.
Opec+ production rose by 2.25mn b/d on the month to 31.95mn b/d in June, the highest since the US-Iran war began on 28 February, Argus estimates. But overall output was still around 7.2mn b/d lower than levels before the war began. The June increase was driven by the Mideast Gulf members that were able to ramp up exports through the strait of Hormuz following the US-Iran interim peace deal on 18 June. Saudi Arabia, Iraq, Kuwait, Iran and Bahrain collectively increased production by 2.17mn b/d.
But the recovery is under serious threat with the US and Iran exchanging fire across the Mideast Gulf this week. Any further escalation could even reverse some of the production gains that several key Opec+ members have made in recent weeks.
The US-Iran war had devastating initial consequences for Opec+ production, which fell by a record 8.1mn b/d in the month following the conflict. Unable to export through Hormuz due to the threat of attacks on shipping, key members such as Saudi Arabia, Iraq and Kuwait had to curtail large parts of their output. But production rose last month as exports through the strait rose, albeit at levels well below pre-war flows. Saudi output increased by 520,000 b/d on the month to 7.09mn b/d in June, although this was still 3.79mn b/d below pre-war production. Iraq boosted output by 600,000 b/d to 2.15mn b/d as it ramped up exports from its Basrah port inside the Mideast Gulf and increased domestic consumption. Kuwait increased its output by 940,000 b/d to 1.52mn b/d and said production in the last 10 days of June was closer to 2mn b/d.
Iran's production rose by 100,000 b/d to 2.75mn b/d after the US removed a blockade on its exports and issued a sanctions waiver for its oil sales as part of the interim peace deal. This waiver was revoked this week, which could affect Tehran's ability to ramp up production in the weeks ahead.
And in its second month after leaving Opec, the UAE significantly increased both its exports and production. Output rose by 1.71mn b/d to a record 3.82mn b/d in June, around 360,000 b/d above the quota that the UAE would have probably had for the month if it had remained a member of the alliance. The UAE's rapid increase in output to well above pre-war levels has raised questions about a potential market share war between itself and Mideast Gulf Opec members as production recovers.
Wound up
Opec+ members remained around 7.14mn b/d below their target in June, despite the production rebound. Seven core members of the alliance have raised their collective production ceiling in recent months to prepare the ground to boost output significantly once the strait of Hormuz fully reopens. Saudi Arabia, Russia, Iraq, Kuwait, Kazakhstan, Algeria and Oman agreed on 5 July to a further 188,000 b/d rise in their collective target for August, leaving just 188,000 b/d of voluntary cuts in place, which could be fully unwound in September.
If shipping through Hormuz recovers and a permanent end to the war can somehow be agreed, the relaxation of the targets could see the group eventually exceed its pre-war output. That is a big if. There is also the question of Russia's production, which was 760,000 b/d below target in June due to repeated Ukrainian attacks on its energy infrastructure. Further Russian output losses cannot be ruled out as long as the Ukraine war continues.
| Opec+ crude production | mn b/d | |||
| Jun | May* | Target† | ± target | |
| Opec 8 | 13.96 | 11.82 | 20.28 | -6.32 |
| Non-Opec 9 | 12.79 | 12.81 | 13.61 | -0.82 |
| Opec+ 17 | 26.75 | 24.63 | 33.89 | -7.14 |
| Total Opec+ | 31.95 | 29.70 | na | na |
| *revised †includes extra cuts agreed in Apr 23 | ||||
| Opec wellhead production | mn b/d | |||
| Jun | May | Target† | ± target | |
| Saudi Arabia | 7.09 | 6.57 | 10.29 | -3.20 |
| Iraq | 2.15 | 1.55 | 4.35 | -2.20 |
| Kuwait | 1.52 | 0.58 | 2.63 | -1.11 |
| Algeria | 1.00 | 0.98 | 0.99 | 0.01 |
| Nigeria | 1.65 | 1.59 | 1.50 | +0.15 |
| Congo (Brazzaville) | 0.30 | 0.28 | 0.28 | +0.02 |
| Gabon | 0.21 | 0.22 | 0.18 | +0.03 |
| Equatorial Guinea | 0.04 | 0.05 | 0.07 | -0.03 |
| Opec 8 | 13.96 | 11.82 | 20.28 | -6.32 |
| Iran | 2.75 | 2.65 | na | na |
| Libya | 1.35 | 1.32 | na | na |
| Venezuela | 1.10 | 1.10 | na | na |
| Total Opec 11^ | 19.16 | 16.89 | na | na |
| †includes extra cuts agreed in Apr 23 | ||||
| ^Iran, Libya and Venezuela are exempt from production targets | ||||
| Non-Opec crude production | mn b/d | |||
| Jun | May* | Target† | ± target | |
| Russia | 9.00 | 9.00 | 9.76 | -0.76 |
| Oman | 0.92 | 0.95 | 0.83 | +0.09 |
| Azerbaijan | 0.44 | 0.44 | 0.55 | -0.11 |
| Kazakhstan | 1.86 | 1.86 | 1.60 | +0.26 |
| Malaysia | 0.34 | 0.35 | 0.40 | -0.06 |
| Bahrain | 0.04 | 0.03 | 0.20 | -0.16 |
| Brunei | 0.06 | 0.05 | 0.08 | -0.02 |
| Sudan | 0.01 | 0.01 | 0.06 | -0.05 |
| South Sudan | 0.12 | 0.12 | 0.12 | -0.00 |
| Total non-Opec | 12.79 | 12.81 | 13.61 | -0.82 |
| *revised †includes extra cuts agreed in Apr 23 | ||||
