OPEC+ agrees to raise quotas by 188,000 barrels per day in August; since the outbreak of the US-Iran war, the cumulative increase has nearly reached one million barrels.

OPEC+ agrees to raise quotas by 188,000 barrels per day in August; since the outbreak of the US-Iran war, the cumulative increase has nearly reached one million barrels.

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OPEC+ is pushing forward with a new round of production increases, profoundly reshaping the oil market supply landscape.

On July 5, according to Bloomberg, OPEC+ has agreed to raise its production quota by 188,000 barrels per day in August. This production increase continues the group's pre-set course of gradually withdrawing previous production cuts, and also marks the latest progress in the resumption of exports by Persian Gulf oil-producing countries after the temporary peace agreement between the US and Iran.

Brent crude oil futures prices have fallen 43% from wartime peaks, currently hovering near $72 per barrel. As shipping in the Persian Gulf gradually returns to normal, signs of oversupply have already appeared in key Asian markets. Some institutions predict that global crude oil oversupply may reoccur, and OPEC+ may soon face a dilemma of whether to reduce production or fight for market share.

Accumulated quota increase approaches one million barrels, withdrawal from production cuts nears its end

This additional quota of 188,000 barrels per day will bring the cumulative quota increase by OPEC+ since the outbreak of war to 940,000 barrels per day, equivalent to nearly 1% of global demand.

The production increase plan is jointly promoted by seven major member countries led by Saudi Arabia and Russia. According to previous Bloomberg reports, OPEC+ has set a roadmap to fully withdraw the two rounds of production cuts from 2023 through continued quota increases by September.

Currently, the third tier of production cuts is planned to remain in effect until the end of the year, but some representatives stated last month that the timetable for restarting this tier of cuts may be brought forward.

It is worth noting that the above quota increases are still largely "on paper"—even before the Strait of Hormuz was blocked, many member countries had already been unable to reach their quota ceilings due to actual capacity constraints, so the actual recovered production from the third tier of cuts is expected to be only a portion of the quota figures.

Export recovery faces production bottlenecks, internal division within OPEC+ intensifies

The US-Iran temporary peace agreement has cleared a key obstacle for Persian Gulf oil producers to resume exports. According to tanker tracking data, Saudi Arabia and the UAE's oil exports have basically returned to pre-war levels, and both countries' shipping channels through the Strait of Hormuz have been unblocked. But Bloomberg compiled data shows that actual production in both countries remains far below normal, with the current export rebound mainly relying on the consumption of previously accumulated inventories, rather than synchronised capacity recovery. Full release of output will still take time.

The pressure from supply recovery has already emerged in Asian markets. As shipments from the Persian Gulf concentrate at ports, key markets in the region are experiencing a temporary surplus, putting pressure on oil prices.

As production increases progress, OPEC+'s internal cohesion is being tested. Last month, founding member Iraq said it would not rule out quitting the group if it could not obtain a higher production quota. The UAE withdrew from OPEC in May this year for similar reasons, expressing dissatisfaction with mandatory production limits. Abu Dhabi has a large amount of idle capacity waiting to be reactivated due to the war and has long-term expansion plans, which are expected to continue to put pressure on oil prices and their former allies.

Analysts point out that as supply continues to grow and oil prices remain under pressure, OPEC+ will soon face a key choice: to cooperate and cut production to support prices, or to fight individually for market share, which could trigger a price war. This direction not only concerns the pattern of the global energy market, but will also significantly affect investors' risk assessment and allocation decisions regarding oil assets.

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