OPEC+ Agrees To Boost Oil Output. It May Not Reflect In Market Soon.

Oil production quota will increase from September amid the supply disruptions spurred by the Middle East and the Russia-Ukraine conflicts.

The OPEC+ on Sunday agreed to increase the output to around 188,000 barrels per day, according to a Reuters report.

The news outlet reported that the export disruptions from the Gulf, Russia and Kazakhstan due to geopolitical conflicts meant that successive OPEC+ have remained largely on paper, causing little impact on the market.

The core OPEC+ members, Saudi Arabia, Russia, Iraq, Kuwait, Algeria, Kazakhstan and Oman, agreed on the September increase.

“The seven participating countries decided to implement a production adjustment of 188 thousand barrels per day,” the OPEC+ said in a statement.

The real market impact of the output hike is unlikely till the Strait of Hormuz deadlock ends, according to reports. A fifth of the world’s energy and cargoes were shipped through the route before the US-Israel war on Iran began on February 28. The major oil producers in the Gulf have not been able to increase exports due to the closure of Hormuz enforced by Iran.

A brief ceasefire in June that had rekindled hopes of a lasting peace in the Middle East crumbled later.

The move ends the phased rollback of a 1.65 million bpd supply cut initially agreed in 2023. At that time, the OPEC+ included the United Arab Emirates (UAE). It announced its decision to leave OPEC in May.

Oil prices fell more than $1 on Friday as improving crude shipments through the Strait of Hormuz and an expected OPEC+ production increase outweighed fears of further supply disruptions from the ongoing Middle East conflict. Brent crude slipped $1.03, or 1.2%, to $88.00 a barrel, while U.S. West Texas Intermediate (WTI) crude fell $1.50, or 1.8%, to $82.09 though these benchmarks remain on track for monthly gains of around 20%.

OPEC+ sources, which had indicated before the meeting that the group will likely pause output increases for the fourth quarter, made no reference on that count its statement.

An analyst at Rystad was quoted as saying by Reuters that the next challenge is managing the surplus that may emerge as export flows normalize.

The report said after September’s output hike, which has been agreed upon by core members, OPEC+ still has an existing output cut that applies to most of the group’s members. Those cuts will amount to roughly 2 million bpd and are likely to continue this year.

Some OPEC+ members including Iraq are also prodding the group for higher individual quotas in sync with their higher production capacity.

OPEC+ includes 21 members comprising the Organization of the Petroleum Exporting Countries along with Russia and other allies.