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FinanceOPEC+ Set to Approve 188,000 bpd Output Hike on Aug 2 Despite Production Disruptions
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OPEC+ is expected to approve another 188,000 barrels per day production target increase for September when eight key producers meet on August 2, continuing a months-long campaign to unwind voluntary supply cuts. However, actual production has been declining due to disruptions: the Iran war affected Gulf exports, Houthi attacks on Red Sea shipping threaten Saudi Arabia's alternative export route, Iraq faces export bottlenecks, Kazakhstan cut production after drone attacks on a Black Sea terminal, and Russia deals with refinery disruptions from Ukrainian drone strikes. Brent crude topped $100/barrel amid these concerns. The increase would complete the rollback of the 1.65 million bpd voluntary cut adopted in 2023, with seven producers restoring roughly 1.15 million bpd of quotas since April. Higher quotas signal OPEC+ intends to replace lost barrels when export routes allow.
Source report
OPEC+ is expected to approve another production target increase when eight key producers meet on August 2, extending a months-long campaign to unwind voluntary supply cuts that have existed largely on paper since the Iran war upended Gulf exports.
Reuters reported Thursday that Saudi Arabia, Russia, Iraq, Kuwait, Algeria, Kazakhstan, and Oman are expected to raise their combined September production target by another 188,000 barrels per day (bpd), matching the increases announced for June, July, and August.
Quota Increases vs. Actual Production
The problem is that quotas have been rising while actual production has been moving in the opposite direction.
According to OPEC's own data, the group produced 36.28 million bpd in June, down from nearly 43 million bpd before the war began in February. Repeated disruptions to shipping through the Strait of Hormuz, followed by renewed attacks on vessels in the Red Sea, have prevented several Gulf producers from restoring exports despite higher official targets.
Geopolitical Pressures on Export Routes
Brent crude topped $100 a barrel Thursday after Houthi attacks on Saudi-linked tankers raised fresh concerns about traffic through the Bab el-Mandeb Strait. Saudi Arabia shifted much of its crude exports to the Red Sea after Hormuz became unreliable. That alternative route is now coming under pressure as well.
Rollback of Voluntary Cuts
If approved, September's increase would complete the rollback of the 1.65 million bpd voluntary production cut adopted in 2023, adjusted for the UAE's departure from OPEC earlier this year. Reuters calculations show the seven producers will have restored roughly 1.15 million bpd of quotas since April.
Country-Specific Constraints
- Iraq remains constrained by export bottlenecks.
- Kazakhstan has begun cutting production after drone attacks shut down tanker loadings at the Caspian Pipeline Consortium terminal on the Black Sea, forcing operators to reduce upstream flows.
- Russia continues to face refinery disruptions from Ukrainian drone strikes.
- Saudi Arabia has available production capacity but faces growing risks to its export infrastructure.
Strategic Purpose of Increases
The production increases still serve a purpose. Higher quotas signal that OPEC+ intends to replace lost barrels as soon as export routes allow it.
By Julianne Geiger for Oilprice.com
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OPEC+ Set to Raise Output Targets Despite Inability to Meet Current Quotas