OPEC's June output surged by 2.34 million barrels per day, returning the crude oil market to "oversupply" trading.

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OPEC's crude oil production rebounded sharply last month, mainly because Gulf members resumed exports through the Strait of Hormuz after a peace agreement was reached between the US and Iran.

According to Bloomberg, OPEC's output in June increased by 2.34 million barrels per day to 18.75 million barrels per day, with the growth mainly coming from Kuwait, Saudi Arabia, and Iran. However, production remains significantly below pre-war levels.

At present, weak oil demand combined with supply recovery has resulted in surplus in some markets. Brent crude futures traded near $72 per barrel on Friday, erasing war-time gains.

In the broader OPEC+ alliance, which includes Russia, main members will hold a monthly video meeting on Sunday to discuss production limits for next month. The market expects they may continue with a modest increase in production.

Production remains significantly below pre-war levels

Despite notable single-month growth, OPEC's overall output is still far below pre-war levels. After adjusting for the withdrawal of the UAE, the organization's June production is still 7.3 million barrels per day lower than in February, a 28% decrease.

The Strait of Hormuz was largely closed at the start of the conflict, and Gulf oil producers had previously explored alternative transportation routes.

Following the US-Iran agreement, public transit routes have been fully restored. Tanker tracking data shows Saudi oil shipments have recovered to 90% of normal levels.

Kuwait leads, Iranian crude stockpiled at sea

By country, Kuwait saw the largest increase among OPEC's 11 members in June, with production surging by 870,000 barrels per day to 1.36 million barrels per day. Its output had previously been reduced by about 80% due to the conflict and remains well below normal levels.

Saudi Arabia ranked second with an increase of 550,000 barrels per day, bringing its daily output in June to 7.2 million barrels; Iran's rise was 510,000 barrels per day, with a daily output reaching 2.85 million barrels. Notably, Iran is currently facing difficulty finding buyers, resulting in large volumes of crude oil being stockpiled on floating storage tankers offshore, awaiting sale.

Beyond production trends, internal political disagreements within OPEC should not be overlooked. The UAE officially withdrew from OPEC in May, giving it the freedom to increase output once the Strait situation stabilizes completely. Iraq has also threatened to leave if it does not ultimately receive a higher production quota from the organization.

OPEC+ expected to continue modest production increases in August

Key OPEC+ members, including Russia, will hold a monthly video meeting on Sunday to discuss production policy for next month.

This group of seven major oil producers has already announced several rounds of modest, symbolic production increases during the war, in order to continue the process launched a few years ago to theoretically restore previous cuts.

Two representatives said this week that another daily increase of 188,000 barrels in quotas is expected to be announced for August, which will be the penultimate stage of the recovery plan.

Among other alliance members, Russia's oil exports rose to record highs after Ukraine struck its domestic refineries, as crude that could not be processed at home was diverted for export, further adding to global supply pressure.

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