OPEC’s oil production rebounded sharply in June as Gulf producers finally began bringing shut-in barrels back online after months of war-induced disruptions. But despite the impressive headline number, the cartel is still pumping nowhere near where it was before the Strait of Hormuz crisis turned Middle East oil flows upside down.
According to Reuters’ monthly survey, the 11 OPEC members produced 19.43 million barrels per day in June, up 3.3 million bpd from May, when output plunged to the lowest level recorded by the survey since at least 2000.
The biggest gains came from Kuwait and Iran. Tehran was able to restore production after the United States lifted its naval blockade of Iranian ports under last month’s 60-day agreement, while Gulf producers gradually restarted wells that had been shut as storage filled and tanker traffic through Hormuz ground to a halt.
Saudi Arabia and Iraq also boosted output, while Nigeria and Libya posted smaller increases despite avoiding the worst of the Gulf disruptions.
The rebound, however, shouldn’t be mistaken for a return to normal.
Production remains well below OPEC’s collective quotas, and much of the recent recovery reflects producers simply restarting volumes they were forced to shut in rather than adding new supply. Tanker traffic through Hormuz remains well below pre-war levels, and insurers and shipowners are still approaching the waterway with caution after repeated attacks on commercial vessels.
That reality helps explain why OPEC+’s repeated production quota increases have had little immediate impact on actual supply. The group has announced several quota hikes since the Iran war began, but until recently, there simply wasn’t enough export capacity to move the extra barrels.
Meanwhile, another challenge is emerging.
The United States has just posted record crude production of nearly 14 million barrels per day, while the UAE—now outside OPEC—is exporting record volumes of its own as it empties storage built up during the conflict. Together, those developments are fueling renewed talk of oversupply and keeping pressure on crude prices.
By Julianne Geiger for Oilprice.com
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