OPEC+, including Russia, has announced an increase in the allowable oil production level for July by 188,000 b/d, as detailed in the alliance's statement. Similarly, quotas were raised for June. In May, OPEC+ quotas were increased by 206,000 b/d, but this included volumes from the UAE, which announced its exit from OPEC and OPEC+ on April 28 (see “Ъ” from April 29).
Russia and Saudi Arabia will each be able to increase oil production in July by 62,000 b/d compared to June, reaching 9.82 million and 10.35 million b/d respectively. The quota for Iraq in July has been raised by 26,000 b/d to 4.37 million b/d, for Kuwait by 16,000 b/d to 2.64 million b/d, for Kazakhstan by 10,000 b/d to 1.6 million b/d, for Algeria by 6,000 b/d to 995,000 b/d, and for Oman by 5,000 b/d to 831,000 b/d.
These figures do not take into account the compensation schedule for previous overproduction. The OPEC+ statement indicated that the compensation period has been extended to the end of December 2026.
OPEC+ highlighted that the member countries of the alliance will continue to monitor and assess market conditions, reaffirming the importance of a cautious approach and maintaining full flexibility regarding increases, suspensions, or cancellations of voluntary production adjustments.
The quotas for August will be determined at the OPEC+ meeting on July 5.
Senior analyst for the oil and gas and transport sectors at Euler, Andrey Polishchuk, believes that the relaxation of restrictions will proceed at a similar pace until September. "After that, a pause is possible, and the cartel may revert to reducing restrictions in 2027 if demand growth expectations are confirmed," he said. Argus agency notes that if OPEC+ countries continue to increase quotas at the current pace, they will complete the reduction of the last package of voluntary limits by September.
According to Argus, decisions to increase production targets remain more of a "theoretical exercise" for Saudi Arabia, Iraq, and Kuwait, which have had to cut production due to Middle Eastern conflicts and the closure of the Strait of Hormuz. A source from the agency noted that lifting restrictions should be seen as groundwork for increasing production by these countries after the strait reopens.
Argus estimates that in May, the total oil production from OPEC+ countries was 29.53 million b/d, which is 9.6 million b/d lower than before the outbreak of hostilities in the Middle East, primarily due to reductions in the Persian Gulf nations.
According to Argus, Saudi Arabia's oil production in May increased by 250,000 b/d month-on-month to 6.57 million b/d, but remained 3.66 million b/d below the target level. In Iran, production fell by 300,000 b/d to 2.65 million b/d. Production in Russia, according to Argus, remained at 9 million b/d.
Sergey Tereshkin, Director General of Open Oil Market, states that the increase in production ceilings will enable OPEC+ countries to boost supply after the reopening of the Strait of Hormuz without destabilising the market, as the rise in output will remain within previously announced limits. "Overall, such a strategy is quite rational: it will allow for increased market share in the future without shocks, as experienced in March 2020 during the first breakdown of the deal," he commented. In that year, Russia announced its exit from the OPEC+ deal on April 1, and a new agreement was established commencing May 1.
Igor Yushkov, an expert from the Financial University, also believes that raising quotas to levels that do not restrict anyone will help avoid future market shocks, particularly after the reopening of the Strait of Hormuz when prices might naturally decline. Russia, the expert notes, has been underperforming its quotas for several months due to a lack of investment in the industry and infrastructure attacks, so returning to production levels above 9 million b/d would be a commendable outcome.
Source: Kommersant
