Opec+ has agreed to increase its output for a fifth consecutive month in August owing to lower supply worries and falling oil prices, amid an uneasy ceasefire between the US and Iran.
The seven core members of the bloc are to collectively add 188,000 barrels per day next month, the third straight month in which it will increase its output by the same level, Opec+ said on Sunday.
For April and May - before the UAE's exit - the group agreed to raise output by 206,000 bpd each month, triggering its unwinding of 1.65 million bpd of production cuts agreed in 2023.
The unwinding of the voluntary cut reflects a business-as-usual approach and has been largely on paper due to an unprecedented supply shock from the Iranian blockade of the Strait of Hormuz.
Under the allocation for August, Saudi Arabia will increase output by 62,000 bpd, bringing its required production to 10.4 million bpd, while Russia will add 62,000 bpd to bring its output to 9.88 million bpd.
Iraq will add 26,000 bpd to a target of 4.4 million bpd, Kuwait's production is set to increase by 16,000 bpd to 2.66 million bpd, while Kazakhstan will add 10,000 bpd to reach 1.6 million bpd.
Algeria's share is set to rise by 6,000 bpd to a required production level of one million bpd and Oman will boost production by 5,000 bpd bpd to reach 836,000 bpd.
Opec+ said the decision was in line with its commitment to maintain balance and stability in oil markets.
The countries will "continue to closely monitor and assess market conditions, and in their continuous efforts to support market stability, they 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, including reversing the previously implemented voluntary adjustments announced in November 2023", the group said.
The seven countries will next meet on August 2.
Crude prices have significantly declined from wartime highs, going back to pre-conflict levels last week. On Friday, they held steady, with Brent making its first weekly gain in four weeks, as traders continued to strip out the geopolitical risk premium built into prices during the Iran war.
At their peak during the conflict that began on February 28, Brent and West Texas Intermediate shot up by about 70 per cent.
Shipping in the Strait of Hormuz – through which about a fifth of the world's oil and gas passed before Iran shut the waterway at the start of the war – is recovering gradually.
The US and Iran last month signed a preliminary agreement for a ceasefire that lasts 60 days, in which time they will work try to finalise a lasting peace agreement. The truce remains fragile, after the countries exchanged strikes last week.
Oil prices are driven by expectations as much as they are by physical supply, said Nagham Hassan, a market analyst at trading platform eToro.
"The signing of the memorandum of understanding on June 17, followed by the US sanctions waiver allowing Iran to resume selling oil in US dollars, led markets to price out the risk of a prolonged disruption in the Strait of Hormuz," she said.
"That significantly reduced the geopolitical risk premium, even though tanker backlogs and shipping delays across the Gulf are still working their way through the system."
Opec last month lowered its oil demand outlook for 2026 for the second consecutive time, while remaining confident of a “resilient” global economy amid the disruption caused by the US-Iran war. Opec cut its demand view to 970,000 bpd, from a previous assessment of 1.17 million bpd, the Vienna-based group said in its monthly report for June.
The US Energy Information Administration also lowered its demand estimates for this year by about one million bpd.
Opec has said the Iran war has a smaller impact on energy consumption, compared with assessments made by the EIA and the Paris-based International Energy Agency.
