The seven core Opec+ members agreed on Sunday to another modest 188,000 b/d increase in their collective production target for July, despite the conflict in the Middle East continuing to disrupt supplies from several of the group's biggest producers.
The increase mirrors that which the group ꟷ Saudi Arabia, Russia, Iraq, Kuwait, Kazakhstan, Algeria and Oman ꟷ agreed to for June at its last meeting on 3 May. But it falls short of the 206,000 b/d increases from the two previous months ꟷ reflecting the UAE's late-April decision to exit both the Opec and Opec+ alliances effective 1 May.
The increases are part of a wider process that began in April last year to unwind 1.65mn b/d of production cuts, but they will not result in any real output increases until the strait of Hormuz reopens.
The group has met and agreed to raise its production target four times since the start of the US-Iran war on 28 February, which prompted Tehran to begin severely disrupting shipping through the strait. This de-facto closure of the key waterway has forced several Mideast Gulf countries — including three of the seven in this group — to significantly scale back production since they rely on the strait for their energy exports.
Argus estimates that crude production from these three countries was close to 8.5mn b/d below their cumulative target for May.
Overall Opec+ output in May was down 9.6mn b/d from the level before the war began.
With no obvious end in sight to the conflict, or a re-opening of the strait, production from the Mideast Gulf looks almost certain to remain constrained in the short-term.
As in previous months, the group reiterated that it retains "full flexibility to increase, pause or even reverse" previously implemented adjustments to their production targets.
The group of seven is scheduled to meet next on 5 July.
