OPEC+ Raises Oil Output Targets Amid Supply Recovery

OPEC+ members have agreed to raise oil production targets by 188,000 barrels per day starting from August, according to multiple reports. The decision comes as exports through the Strait of Hormuz recover following the U.S.-Iran war, potentially adding to global supplies.

The increase was announced after a virtual meeting where officials reviewed market conditions and outlook. Seven member countries—Saudi Arabia, Russia, Iraq, Kuwait, Kazakhstan, Algeria, and Oman—participated in the decision. This marks the fifth consecutive monthly increase by these OPEC+ members since 2023.

The UAE left OPEC in May but raised its crude output above 3.8 million bpd in June, surpassing pre-Iran war levels according to Reuters estimates. A Reuters survey found that OPEC oil output rose by 3.3 million barrels per day in June to 19.43 million bpd, recovering from its lowest levels in over two decades.

The world has absorbed the loss of over a billion barrels of oil supply since the Iran war began with surprising ease, but depleted stocks bring risks. Tehran's throttling of the Strait of Hormuz in response to U.S. and Israeli attacks fed fears of a catastrophic global energy crunch. The conflict created the biggest energy disruption in history, according to the International Energy Agency (IEA). At its worst, the headline supply loss was 14 million barrels per day. However, worries about running out of gasoline, diesel or jet fuel never materialized.

The sudden change reflects the U.S.-Iran interim deal in June that has prompted more shipping to flow through the crucial Strait of Hormuz and a resumption of oil loadings, depressing global oil prices. Oil traders said that not only have other Gulf suppliers also cut their prices to attract demand, but the sanctions waiver on Iran crude sales add to the competition for sellers.

Oil refiners around the world have seen profits surge thanks to a rare combination of robust fuel demand and weak crude prices, as markets have rapidly readjusted following the reopening of the Strait of Hormuz. The benchmark U.S. 3-2-1 crack spread, a widely watched measure ​of refining profitability, recently climbed above $60 a barrel, the highest level on record. Refining margins in Asia and Europe have also risen sharply.

Global oil demand is set to decline by 1 million barrels per day year-on-year in 2026, which would mark its first annual decrease since the height of the Covid-19 pandemic in 2020. The IEA's forecast rests on the assumption of a ceasefire and the gradual reopening of Hormuz, an outcome that looks increasingly uncertain as the U.S. and Iran traded hostilities this week.

Oil prices edged lower on Friday, with global benchmark Brent crude futures for September delivery easing to $76.25 per barrel, while U.S. West Texas Intermediate crude futures held steady at $72.09. The IEA expects a 'very uncertain and unstable situation' in the region but anticipates a return to surplus through the end of the year and into next year, providing welcome relief to the market.