OPEC+ has agreed to raise oil production again in August, extending its gradual reversal of earlier supply cuts as the reopening of the Strait of Hormuz after months of disruption eases concerns over Middle East exports and keeps downward pressure on crude prices.
The alliance, comprising the Organization of the Petroleum Exporting Countries and allies led by Russia, announced after a virtual meeting on Sunday that it would increase collective production quotas by 188,000 barrels per day (bpd) from August. The latest adjustment follows identical quota increases approved for June and July as the group steadily restores production that had been withheld under a 2023 supply agreement.
The decision comes at a time when global oil markets are shifting focus from geopolitical supply risks to concerns over slowing demand, particularly in China, and rising output from producers outside the Middle East.
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Since April, the seven core producers responsible for OPEC+’s active supply management have collectively increased production targets by nearly 800,000 bpd. Those countries include Saudi Arabia, Russia, Iraq, Kuwait, Algeria, Kazakhstan, and Oman.
However, much of the planned increase has yet to materialize.
Exports from several Gulf producers were severely disrupted during the U.S.-Israeli conflict with Iran after shipping through the Strait of Hormuz, one of the world’s most critical oil transit chokepoints, was interrupted. The waterway serves as the main export route for Saudi Arabia, Iraq, Kuwait, and several other major oil exporters.
As a result, OPEC data show the group’s production fell sharply to 33.13 million bpd in May, down from 42.77 million bpd in February, reflecting the impact of the conflict on regional exports.
Production began recovering in June after diplomatic efforts led by the United States helped facilitate the resumption of oil shipments from Gulf producers, although output remains below levels recorded before the conflict.
Despite the lingering supply disruptions, oil prices have largely surrendered the gains triggered by the war.
Brent crude was trading around $72 per barrel on Friday, a dramatic retreat from highs above $120 per barrel reached during the height of the conflict and broadly back to levels seen before the United States and Israel launched military operations against Iran on February 28.
Several factors have contributed to the decline.
Demand from China, the world’s largest crude importer, has remained weaker than expected, while producers outside the Middle East have continued increasing exports. In addition, the International Energy Agency (IEA) coordinated a record release of strategic petroleum reserves among consuming nations, helping ease concerns over potential supply shortages.
Markets have also been reassured by a memorandum of understanding between Washington and Tehran aimed at ending hostilities, increasing expectations that Gulf oil exports will continue normalizing in the coming months.
Giovanni Staunovo, an analyst at UBS, said the latest production decision was widely anticipated by the market.
“The group of seven kept unwinding their production cuts as widely expected,” Staunovo said.
He added that investors will now focus on how quickly oil exports through the Strait of Hormuz recover and whether Chinese crude imports rebound strongly enough to absorb additional supply.
While the immediate concern has shifted toward restoring production, OPEC+ also faces longer-term internal challenges that could complicate future policy decisions.
The alliance has been reshaped by the United Arab Emirates’ decision to leave the production management agreement earlier this year. Abu Dhabi withdrew from the quota arrangement in late April, arguing that it wanted greater flexibility to produce in line with its expanding production capacity rather than remain constrained by group limits.
At the same time, Iraq has indicated it wants a larger production allocation, potentially setting the stage for difficult negotiations as OPEC+ approaches the final phase of unwinding its voluntary cuts.
Although OPEC+ has 21 member countries, only the seven core producers have been actively participating in the monthly supply adjustment mechanism in recent years. Their current production increases represent the phased reversal of a 1.65 million bpd voluntary production cut agreed in 2023, when the UAE was still part of the arrangement.
According to Reuters calculations, after accounting for the UAE’s withdrawal effective May 1, the remaining seven producers will still have approximately 379,000 bpd of the original cut left to restore following the August increase.
If OPEC+ approves another production increase of roughly the same magnitude at its next meeting scheduled for August 2, the alliance would complete the unwinding of its 2023 voluntary production cuts by September.
The decision underpins OPEC+’s confidence that supply disruptions caused by the Middle East conflict are gradually easing. Nevertheless, the group’s strategy remains highly dependent on the pace of recovery in global oil demand, the stability of shipping through the Strait of Hormuz, and broader geopolitical developments that continue to influence energy markets.