OPEC+ members have announced plans to boost oil production as energy markets show tentative signs of recovery amid the fallout of the US-Israel war on Iran.

OPEC+ said on Sunday that seven member countries – Saudi Arabia, Russia, Iraq, Kuwait, Kazakhstan, Algeria, and Oman – would raise output by 188,000 barrels per day from August after officials held a virtual meeting to “review global market conditions and outlook”.

The production boost is the fifth consecutive increase announced by the seven OPEC+ members in as many months, continuing a gradual unwinding of production cuts announced in 2023.

OPEC+, which includes the Organization of the Petroleum Exporting Countries (OPEC) and allied oil producers – including Russia, Bahrain and Oman – cut output in April 2023, and again in November 2023, amid a string of bank collapses that triggered a major sell-off in oil and other commodities.

“The countries will continue to closely monitor and assess market conditions,” the intergovernmental organisation said in a statement, adding that officials had “reaffirmed the importance of adopting a cautious approach and retaining full flexibility to increase, pause or reverse the phase out of the voluntary production adjustments”.

The seven member countries added that they would meet again on August 2 to review the situation.

After briefly topping $126 a barrel in April, Brent crude oil prices have fallen back to pre-war levels in recent days amid growing hopes for a permanent end to the Iran conflict and a return to normal shipping in the Strait of Hormuz.

Traffic in the strait has ticked up since US President Donald Trump and Iranian President Masoud Pezeshkian signed their memorandum of understanding on ending the war on June 17, though it remains far below pre-conflict levels.

There were 38 confirmed transits in the strait on July 2, down from 48 on July 1, according to the vessel tracking platform MarineTraffic, compared with roughly 130 daily crossings before the war.

Brent crude futures for September delivery stood at $72 as of 02:01 GMT on Monday, below Brent’s settlement price of $72.48 on February 27, the day before the US and Israel launched strikes on Iran, starting the war.

Iran’s effective closure of the Strait of Hormuz, which carried about one-fifth of global oil and liquefied natural gas supplies before the start of the war, forced OPEC+ members to slash production as a growing backlog of unshipped barrels maxed out the region’s crude storage capacity.

Total OPEC+ production dropped to 33.13 million bpd in May, down from 42.77 million bpd in February, according to OPEC figures. (Al Jazeera)

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The Organization of the Petroleum Exporting Countries (OPEC) has agreed to increase oil output quotas by 206,000 barrels per day for May, a rise that is largely symbolic as some of its key members are unable to raise production due to the US-Israeli war on Iran.

The war has effectively blocked the Strait of Hormuz – the world’s most important oil route – since the end of ⁠February and cut exports from OPEC+ members Saudi Arabia, the United Arab Emirates (UAE), Kuwait and Iraq.

In a statement on Sunday, eight members of OPEC+, including Saudi Arabia, Russia, Iraq, the UAE, Kuwait, Kazakhstan, Algeria, and Oman, agreed to increase May quotas during a virtual meeting.

“The countries will continue to closely monitor and assess market conditions, and in their continuous efforts to support market stability,” the statement read.

“The eight countries also expressed concern regarding attacks on energy infrastructure, noting that restoring damaged energy assets to full capacity is both costly and takes a long time, thereby affecting overall supply availability,” it added.

While the quota increase represents less than two per cent of the supply disrupted by the closure of the strait, OPEC+ sources told the Reuters news agency that the pledge had signalled readiness to raise output once the waterway reopens.

Crude prices have surged to a four-year high amid the war, close to $120 a barrel, leading to higher prices for transport fuels.

On Thursday, JPMorgan said oil prices could spike above $150, an all-time high, if oil flows through the Strait of Hormuz remain disrupted into mid-May.

May’s increase is the same as the eight members had agreed on for April at their last meeting on March 1. But amid the war, oil supply disruption on record is estimated to have removed as much as 12 to 15 million bpd or up to 15 percent of global supply.

With the strait still closed, Iran has allowed some countries in the region to use the waterway.

Iran has said Iraq was exempt from any transit restrictions through the strait, with shipping data on Sunday showing a tanker loaded with Iraqi crude passing through the waterway.

Oman’s Foreign Ministry announced on Sunday that deputy foreign minister-level talks were being held with Iran to discuss ⁠⁠options to ensure the smooth transit of vessels through the Strait ‌‌of Hormuz.

US President Donald Trump threatened to escalate attacks and target Iranian civilian infrastructure, including bridges and power plants, if the Strait of Hormuz is not reopened by Monday. (Al Jazeera)

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Oil prices fell in early Asian trading on Thursday after uncertainty that the United States will avoid a debt default weighed against the prospect of further OPEC+ production cuts.

According to Reuters, Brent crude futures slipped 5 cents, or 0.1%, to $78.31 a barrel by 0042 GMT. U.S. West Texas Intermediate crude (WTI) fell 16 cents, or 0.2%, to $74.18.

Some progress had been made but several issues remained unresolved in U.S. debt ceiling negotiations, House Speaker Kevin McCarthy said Thursday, as the deadline ticked closer to raise the federal government’s $31.4 trillion borrowing limit or risk default.

Negotiators for Democratic President Joe Biden and top congressional Republican Kevin McCarthy reconvened Wednesday at the White House to try to close a deal.

Oil prices were also pressured by news that Britain’s stubbornly high inflation rate fell by less than expected last month, according to official data that raised the chances of more interest rate hikes.

In the previous session, oil prices were supported by a warning from Saudi Arabia’s energy minister that short-sellers betting oil prices will fall should “watch out” for pain.

Some investors took that as a signal that the Organization of Petroleum Exporting Countries and allies including Russia, together called OPEC+, could consider further output cuts at a meeting on June 4.

Oil was also supported by an unexpected, massive fall in U.S. crude oil inventories in the week of May 19, reported by the Energy Information Administration on Wednesday. (NewsWire)

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