Oil producers group OPEC+ announced a complete unwinding of its members’ “voluntary” production cuts with effect from September, following its latest meeting on Sunday.
The group, which includes a select group of Russia-led oil producers and the Organization of the Petroleum Exporting Countries spearheaded by Saudi Arabia, announced a production increase on Sunday of around 188,000 barrels per day that takes effect next month.
When the said output hike takes shape, it would complete the unwinding of a layer of voluntary output cuts. The increase agreed by core OPEC+ members — Saudi Arabia, Russia, Iraq, Kuwait, Algeria, Kazakhstan and Oman — concludes the phased rollback of a 1.65 million bpd supply cut originally agreed in 2023 by these producers.
At the time, the group included the United Arab Emirates as well. It left OPEC+ and OPEC in May. Even though the UAE’s departure has complicated the picture for the group, there has been little comment since on the development from OPEC+.
The group has one more layer of output cuts involving most of its 21 members of around 2 million bpd dating back to 2022. These cuts will likely remain in place until the end of this year as global oil prices remain volatile due to ongoing tensions between the U.S. and Iran.
Given the extent of the disruption to oil exports from the Middle East since the start of hostilities between Washington and Tehran, most of the hikes announced by OPEC+ since March have had a negligible impact on the physical crude market.
Market Yet To Normalize For OPEC+
The OPEC+ Joint Ministerial Monitoring Committee or “JMMC” offered no clues on how it intends to proceed in the fourth quarter of 2026.
However, it expressed concern regarding attacks on energy infrastructure, noting that restoring damaged energy assets to full capacity is both costly and takes a long time, thereby affecting overall supply availability.
The JMMC stressed that “Any actions undermining energy supply security, whether through attacks on infrastructure or disruption of international maritime routes, increase market volatility and weaken the collective efforts to support market stability” for the benefit of producers, consumers, and the global economy.
Oil prices fell in June following the U.S.-Iran ceasefire to hostilities that began on February 28. However, price spikes returned in July after Washington responded to Iranian attacks on shipping in the key maritime artery of the Strait of Hormuz.
Meanwhile, late last month Yemen’s Iran-backed Houthi rebels began disrupting shipping in the Bab El-Mandeb Strait that links the Red Sea to the Gulf of Aden.
The route is being used by Saudi Arabia to export oil via the Suez Canal north to Europe and down south to Asian markets as an alternative to the Strait of Hormuz.
Both the global proxy benchmark Brent and U.S. benchmark West Texas Intermediate ended trading on Friday down by around 4% ahead of the OPEC+ meeting. But both are also currently trending higher by around 18% compared to last month indicative of current crude market volatility.
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