OPEC+ raises output targets for fourth straight month despite Hormuz crisis crippling actual supply

OPEC+ pressed ahead Sunday with its fourth consecutive monthly increase in oil production targets, even as the ongoing US war with Iran continues to make those targets largely meaningless for several of the group's most significant producers.

Seven core members of the alliance (Saudi Arabia, Russia, Iraq, Kuwait, Kazakhstan, Algeria, and Oman) agreed to lift output quotas by 188,000 barrels per day from July, matching the scale of the June hike and maintaining the pace of a gradual unwinding of cuts first introduced in 2023.

But the gap between targets and reality is stark as the US conflict with Iran has effectively shut the Strait of Hormuz to oil traffic, triggering what analysts describe as the most severe supply crisis in the history of global energy markets.

Gulf members including Saudi Arabia have been unable to fulfil customer orders since late February, CNBC reported, and the UAE's departure from OPEC after nearly six decades in the organisation has compounded the disruption, prompting a downward adjustment to the monthly increment — from 206,000 bpd in April and May to 188,000 bpd — to account for its exit effective May 1.

OPEC's own figures illustrate the severity of the situation. Group production averaged 33.19 million bpd in April, down from 42.77 million in February, a collapse of nearly 10 million bpd in two months.

That prospect is already registering in oil prices. Brent crude futures settled Friday at $93.09 a barrel, down $1.94, while West Texas Intermediate finished at $90.54, off $2.50, as traders grew more confident that a resumption of US-Iran hostilities was less likely, CNBC reported. Prices had been trading near $72 before the conflict began.

At the pump

At the pump, American drivers have seen some relief. The national average price for a gallon of regular gasoline fell 18 cents in a week to $4.24 as of June 4, its second consecutive weekly decline, according to AAA. The drop has tracked crude oil holding below $100 per barrel, though prices remain more than a dollar above where they were a year ago, when the national average stood at $3.14.

Demand has also softened with Energy Information Administration data showing gasoline consumption fell from 9.25 million barrels per day to 8.59 million in the most recent week, while total domestic supply rose from 211.6 million barrels to 215 million.

AAA cautioned that the relief may be short-lived. With the Strait of Hormuz still not fully operational and summer driving season underway, the conditions for a renewed price spike remain in place. The timing of any reopening, and the pace at which Gulf supply can be restored, will determine whether the recent cooling at the pump holds through the season.

With approximately 567,000 bpd of the original 1.65 million bpd cut still to be returned to the market — adjusting for the UAE's exit — the seven-nation OPEC group could complete its full unwind by the end of September if it maintains the current pace of monthly increases, according to Reuters.

In a separate session Sunday involving all 21 OPEC+ members, ministers made no changes to the group-wide output framework in place through the end of 2026, OPEC said in a statement. The full membership also reaffirmed the importance of completing an ongoing review of production capacity, which will inform each member's baseline figures and quota allocations for 2027.

The seven nations will meet again on July 5 to assess market conditions and review compliance. Overproduction by some members since January 2024 remains an unresolved issue, with the compensation period — during which excess output must be offset by additional cuts — now extended through December 2026.