After a symbolic increase of 88,000 barrels, OPEC+ waits for the Strait of Hormuz to “open”

The Zhitong Finance App learned that on Sunday, OPEC+ approved another slight increase in crude oil production quotas. At this point, it has completed the established withdrawal arrangement for the 2023 production reduction plan, while retaining the option to drastically increase crude oil supply if the Middle East conflict situation slows down.

For market investors, the decision sends a signal that OPEC+ remains committed to finding a balance between regional turmoil driving up oil prices and potential future oversupply. If the tension around the Strait of Hormuz abates, Saudi Arabia is expected to further expand production, which may ease inflationary pressure and put downward pressure on oil prices.

The coalition of oil producers led by Saudi Arabia and Russia agreed to raise the September collective output target by 188,000 barrels per day. This increase in production is more symbolic in the real sense, because many member states are no longer capable of producing in full after years of underinvestment, sanctions, or war.

This increase in production indicates that the production reduction plan implemented in 2023 to support oil prices has been completely withdrawn according to the scheduled steps. However, participants said that unless there is a major change in the market environment, quotas are expected to remain unchanged for the rest of the year.

At the time of the adoption of this decision, the situation in the Middle East region is still in turmoil and uneasy. The Iran-related conflict has disrupted oil exports, and attacks by the Iran-backed Houthis also pose a continuing threat to the Red Sea shipping lanes. US President Trump said last weekend that while diplomatic efforts continue, the US will suspend a new round of attacks on Iran.

If regional tension eases and shipping in the Strait of Hormuz returns to normal, Saudi Arabia may have room to further increase production. This move will help supplement the world's crude oil inventories, which have declined markedly, and reverse the current tight supply situation that is driving up gasoline and diesel prices.

However, not all OPEC+ members will benefit from it. Russia continues to produce less than its quota due to Western sanctions, while Kazakhstan faces export interruptions and has exceeded its production targets several times. Saudi Arabia accounts for an overwhelming share of the organization's remaining production capacity.

Looking ahead, OPEC+ will meet again in early September and is awaiting the results of an independent assessment of each member country's production capacity. The review, which is expected to be released later this year, could have an impact on 2027 production quotas and further shape the organization's long-term strategic balance between supporting oil prices and defending market share.