OPEC+ plans 3rd oil production hike since Hormuz closure: Report

The increase in oil production will largely remain unimplemented on the ground if Gulf region supplies continue to be disrupted due to the US–Iran war

OPEC+ is likely to approve a modest increase in oil production today, May 3, sources said, adding that the increase will largely remain unimplemented on the ground if Gulf region supplies continue to be disrupted by the US–Iran war.

The sources also stated that seven member countries of the oil group, which includes OPEC members and partners such as Russia, have agreed in principle to raise oil production targets by about 188,000 barrels per day in June, marking the third consecutive monthly increase.

The step aims to show the alliance’s readiness to provide supplies once the war ends. It also shows that the alliance is proceeding with its plans to boost production despite the UAE's withdrawal last week, according to the sources.

Today’s meeting includes seven OPEC+ member countries, namely Saudi Arabia, Iraq, Kuwait, Algeria, Kazakhstan, Russia, and Oman. With the UAE’s withdrawal, the OPEC+ alliance now includes 21 members, including Iran, but the seven countries—along with the UAE—have participated in making monthly production decisions in recent years.

The US-Iran war, which broke out on February 28, and the resulting closure of the Strait of Hormuz, led to a plunge in exports from OPEC+ members, namely Saudi Arabia, Iraq, and Kuwait, in addition to the UAE. Before the conflict, these producing countries were the only ones in the cartel capable of increasing their production.

Oil sector executives in the Gulf region and global traders said that the production increase will remain largely symbolic until navigation through the Strait of Hormuz resumes, and even then, it may take several weeks, if not months, for flows to return to normal.

The disruption led to oil prices rising to their highest level in four years last week, exceeding $125 per barrel, as analysts began to expect a widespread jet fuel shortage within one to two months and a sharp rise in global inflation.

In a report issued last month, OPEC said that the average crude oil production from all OPEC+ members reached 35.06 million barrels per day in March, a decline of 7.70 million bpd compared to February, as Iraq and Saudi Arabia implemented the largest cuts due to declining exports.