OPEC+ this Sunday decided to add another 188,000 barrels of crude to its collective production next month despite the ongoing disruption in the Middle East resulting from the U.S. and Israeli war against Iran.
The group has approved a series of output hikes totaling close to 600,000 barrels daily since April, but this has remained largely on paper as a lot of big producers in the Middle East cannot restore production to pre-war levels due to the continued blockage in the Strait of Hormuz. The latest 188,000 barrels in daily output would add to that total, Reuters noted in a report on the news.
“An OPEC+ production increase means very little while the Strait of Hormuz remains closed,” a former OPEC and current analyst at Rystad Energy said, as quoted by the publication. “When the Strait of Hormuz reopens, the market could move very quickly from fear of shortage to fear of surplus.”
For now, there does not seem to be any risk of such a move, even though traders appear firmly convinced Hormuz will reopen any day now. Oil prices, meanwhile, have today added about $3 per barrel following reports of new strikes between Israel and Iran. Since the start of the war at the end of February, benchmarks have gained over $20 per barrel, to date, on several occasions spiking above $100 per barrel.
There are seen OPEC+ members that will, theoretically, be adding production, including Saudi Arabia, Iraq, Kuwait, Algeria, Kazakhstan, Russia, and Oman. In practice, it would be difficult for most of them to boost output in any way because of the Hormuz situation, with Iraq especially hard hit by the tanker traffic blockage, seeing its production falling from over 4 million barrels daily to just 1.4 million barrels daily as of May.
By Irina Slav for Oilprice.com
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