In an effort to stabilize global oil markets, members of the OPEC+ alliance will increase their oil production next month. The decision comes after fuel prices recently dropped to levels not seen since before the conflict involving the U.S., Israel, and Iran.
On Sunday, leaders from OPEC+ announced that seven member countries will collectively expand oil production by 188,000 barrels per day starting in August. This marks the fifth month in a row that the group has opted to increase output. The countries participating in this decision include Saudi Arabia, Russia, Iraq, Kuwait, Kazakhstan, Algeria, and Oman.
In their statement, OPEC+ emphasized the importance of monitoring market conditions to support stability, while adopting a cautious approach. Last month, optimism in the market contributed to a drop in crude oil prices, shortly before and after the U.S. and Iran negotiated an interim agreement to halt hostilities.
Under the agreement, Iran allowed ships to freely pass through the Strait of Hormuz, and the U.S. lifted its blockade of Iranian ports. These changes have increased commercial vessel traffic in the strait, which previously handled around 20% of the world’s oil supply. Nonetheless, traffic has yet to return to pre-conflict levels, and tensions remain.
Recently, Iran’s military command insisted that all oil tankers passing through the strait adhere to designated routes or face severe consequences. Meanwhile, oil prices have continued decreasing as negotiations between Iran and the U.S. aim for a lasting peace.
On Friday, Brent crude oil, the international benchmark, closed at under $72 a barrel. This is a significant drop from the highs in March, when it nearly reached $120 per barrel. At that time, strikes on Iran by the U.S. and Israel led to a global energy crisis. With many ships unable to move through the Strait of Hormuz, previous modest increases by OPEC+ could not alleviate the constrained global oil supplies.
Early in the conflict, many major oil-producing countries in the Middle East had to reduce output as there was no outlet for their crude. According to S&P Global Energy, Gulf oil production is not expected to fully recover until at least the first quarter of 2027.
Energy analysts continue to caution that fuel prices and the cost of goods are likely to remain high well beyond the conclusion of the conflict.
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