OPEC+ major members agreed to slightly increase their collective oil production quotas next month, which could lead to more oil supply entering the market if the U.S.-Iran peace deal holds.
OPEC announced on its website that seven oil-producing countries, led by Saudi Arabia and Russia, agreed on Sunday during a video conference to increase their daily production target by 188,000 barrels. This aligns with the organization’s previously established plan to gradually phase out output cuts implemented several years ago, and marks a cumulative increase in OPEC’s daily production quotas of 940,000 barrels since the onset of the oil crisis—equivalent to nearly 1% of global oil demand.
Due to the war blocking the Strait of Hormuz, Persian Gulf members have been unable to increase exports and production, and such growth has so far remained theoretical. However, since Tehran and Washington signed a temporary peace agreement, Saudi Arabia and its neighbors have begun resuming cargo shipments, thereby boosting trade surpluses in major Asian markets.
London crude oil futures have plunged 43% from their wartime highs, approaching $72 per barrel. Some analysts predict a return of global oil oversupply, putting OPEC and its partners on the brink of having to choose between cutting production or fighting for market share—a potential price war.
OPEC’s unity has been challenged after founding member Iraq last month said it might eventually withdraw from the organization if production quotas are not raised.
The UAE withdrew from OPEC in May this year, dissatisfied with the organization’s mandated production quotas. Abu Dhabi, which has substantial unused capacity due to the war, is currently restarting production and plans to gradually increase output—potentially putting pressure on oil prices and its former allies.
Oil tanker tracking data shows that Saudi Arabia and the United Arab Emirates have restored their oil exports to nearly pre-war levels, thanks to peace agreements and successful cargo shipments through the Strait of Hormuz. However, data compiled by Bloomberg indicates that the two countries’ oil production remains significantly below normal levels.
Revenue losses during the war have prompted Iraq to pressure OPEC to significantly raise its oil production ceiling, even threatening to withdraw from the organization. Meanwhile, OPEC is auditing actual oil output among its member countries to determine production targets for 2027.
Bloomberg reported in May that OPEC+ has developed a roadmap to gradually increase quotas again in September, completing the restoration of the two-tier production capacity suspended in 2023. The August output increase will be the penultimate month of this process.
The third and final round of restrictions is set to continue until the end of the year, although some representatives last month indicated that restarting these measures might speed up progress. The group will hold its next meeting on August 2.
