Opec+ approves further oil output increase

Opec+ has agreed a further increase in output targets from August, the group said ​in a statement on ⁠Sunday, adding to global supply at a time when oil prices are falling due to ‌the gradual reopening of the Strait ‌of Hormuz for oil exports.

The oil-producing group agreed during an online meeting to increase quotas by 188,000 barrels per day from August, on top of similar increases for June and July.

The seven core members of Opec+, which groups Opec and allied producers including Russia, have hiked ‌their output quotas from April through July by almost 800,000 bpd.

Yet the increase has remained largely on paper because of the ⁠US-Israeli war on Iran, which closed the Strait of Hormuz to tanker traffic for some of the most important Opec+ members, including Saudi Arabia, Kuwait and Iraq.

Opec+ output fell to 33.13 million bpd in May, according to Opec data, from 42.77 million bpd in February. It began to recover in June thanks to US efforts to help the UAE and other Opec+ nations export more oil, but is still below pre-war levels.

Despite persisting supply disruptions, oil prices have returned to pre-war levels, pressured ​by lower Chinese imports, higher exports from non-Middle East producers, and a record global strategic stock release coordinated by ‌the International Energy Agency.

“The group of seven kept unwinding their production cuts as widely expected,” UBS analyst Giovanni Staunovo said. “The near-term focus will remain on how many tankers will manage to cross the Strait of Hormuz and how quickly demand and Chinese crude imports recover.” A ⁠memorandum of understanding between Washington and Tehran to end the war has also helped convince traders that supply will ultimately return to normal levels.

Brent crude prices traded near $72 per barrel on Friday, down from recent peaks of more than $120 per barrel and ​back to levels traded ‌just before the US and Israel attacked Iran on February 28.

Besides agreeing production targets, Opec+ is also facing other challenges ‌after the United Arab Emirates left the group and Iraq signaled it wants higher quotas.

Opec+ includes 21 members including Iran, but in recent years only the seven nations - and the UAE until its departure - have been involved in monthly production management.

Those seven producers - Saudi Arabia, Russia, ‌Iraq, Kuwait, Algeria, Kazakhstan and ‌Oman - are boosting output as part of the phased rollback of ⁠a 1.65 million bpd supply cut agreed in 2023, when the group still included the UAE.

The ‌UAE quit the alliance in late April.

From August, taking into account the UAE’s exit from ⁠May 1, the seven core members will still have about 379,000 bpd of the original cut to return to the ​market, according to Reuters calculations.

With the August increase now decided, they will have fully unwound the 2023 cut if they make one more hike of around the same size for September at their next meeting on August ⁠2.

Separately, Iraq’s government and US oil services giant Halliburton signed a deal Sunday to manage two oil fields in the country’s south, as Baghdad looks to boost production.

The state-owned “Basra Oil Company has signed a joint management contract with the American company Halliburton for the Bin Omar and Sinbad oil fields” in Basra province, said the Iraqi oil ministry’s media office.

Iraqi Oil Minister Bassem Khodeir said the deal with Halliburton aligns with the government’s plans to “boost oil and gas production capacity”.

He added that Iraq aims to boost oil output at the Bin Omar field by 150,000 barrels per day (bpd) within five years, along with 300 million cubic feet of associated gas. Production at the Sinbad oil field should increase by 80,000 to 100,000 bpd.

Baghdad’s new government led by Prime Minister Ali al-Zaidi has urged the OPEC oil group to increase Iraq’s oil production quota, taking into account the damage done to its industry from past conflicts and the recent Middle East war.

Like other oil producers, Iraq, a founding member of Opec, was greatly affected by the US-Iran conflict, as it is hugely dependent on oil exports, which make up about 90 per cent of its budget revenues. The new contract with Halliburton was signed prior to Zaidi’s upcoming visit to Washington later this month. Zaidi, who only recently took office with the blessing of the United States, hopes to attract more US investment to Iraq, which urgently needs to revive its economy, especially after revenue losses caused by the halt of oil exports during the Middle East war.

Agencies