Kazakhstan, Russia, Saudi Arabia and other key OPEC+ countries have agreed a paper-based modest oil output hike for next month, raising the output targets to 188,000 barrels a day in June.
After the effective closure of the Strait of Hormuz, this is the third consecutive monthly increase, OPEC+ (Organisation of the Petroleum Exporting Countries) said in a statement after an online meeting on Sunday.
The move is designed to show the group is ready to raise supplies once the war stops and signals the bloc is pressing on with managing supplies. The countries are operating 'business-as-usual' approach despite the departure of the UAE from OPEC+ on 1 May, OPEC+ sources and analysts said.
“OPEC+ is sending a two-layer message to the market: continuity despite the UAE’s exit, and control despite limited physical impact", said Jorge Leon who is an analyst at Rystad and former OPEC official.
“While output is increasing on paper, the real impact on physical supply remains very limited given the Strait of Hormuz constraints. This is less about adding barrels and more about signaling that OPEC+ still calls the shots", he added.
Top OPEC+ producer Saudi Arabia’s quota will rise to 10.2 million barrels per day in June under the agreement which is far above actual production. The kingdom reported actual production of 7.76 million bpd to OPEC in March.
The increase is the same as that agreed for May minus the share of the United Arab Emirates.
There are now 12 core members including Iran, left in the group since UAE's departure. In recent years only seven nations - Saudi Arabia, Iraq, Kuwait, Algeria, Kazakhstan, Russia, Oman (and the UAE prior to departure) - have been involved in voluntary production adjustments. These seven are due to meet again on 7 June.
Iran effectively closed the Strait of Hormuz, the key cruicial chokepoint, from the day of the U.S.-Israel strikes on Iran which began on 28 February. The result of this was exports from Saudi Arabia, Iraq, Kuwait and the UAE were heavily reduced.
Even when shipping through the Strait of Hormuz reopens, it will take several weeks if not months for flows to normalise, oil executives from the Gulf and global oil traders have said.
Around 20% of the world's supplies have historically run through the key 21km-wide waterway between Iran and Oman.
Prices for Brent have increased to above $125 per barrel, breaking a four-year record.
The supply disruption has propelled oil prices to a four-year high above $125 per barrel as analysts begin to predict widespread jet fuel shortages in one to two months and a spike in global inflation. Some airlines are considering merging same-destination flights with competitors.
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