OPEC Plus production is likely to increase as supplies recover and oil declines economy

The eyes of the oil markets are turning to the OPEC Plus alliance meeting next Sunday, amid expectations that producers will agree to a new increase in production targets starting in August, in a move that may reflect the alliance’s continuation of gradually regaining its market shares despite the pressures still facing crude prices.

Reuters quoted three informed sources that the seven main countries in the coalition will likely, during their meeting scheduled next Sunday, raise production targets by about 188,000 barrels per day in August, which is the same level they adopted in the increases in June and July.

If the increase is approved, the total increase approved by the seven countries since April will rise to about one million barrels per day, as part of the plan to gradually withdraw from the voluntary cuts amounting to 1.65 million barrels per day, which began to be implemented in 2023.

The proposed increase comes at a time when oil prices have returned to pre-war levels, after concerns about supplies decreased with the gradual reopening of the Strait of Hormuz, in addition to the rise in production from non-member countries in the Middle East, the weakness of Chinese imports, and the International Energy Agency’s launch of the largest withdrawal from strategic stocks, in addition to the US-Iranian memorandum of understanding that contributed to calming market fears.

Brent crude fell below $72 a barrel, while West Texas Intermediate crude settled at $68.30, with the two crude oils losing most of the gains they achieved during the war period, with concerns about supplies receding and the markets’ focus shifting again to the abundance of global supply.

Expectations for increased production have strengthened with the continued recovery of navigation traffic in the Strait of Hormuz, as Bloomberg quoted an American official as saying that oil flows through the Strait exceeded 10 million barrels per day in recent weeks, supported by the American military deployment, which has strengthened the confidence of shipping companies in crossing the sea lane.

The official pointed out that about 5 million other barrels per day are now crossing through alternative export routes, which means that total flows are gradually approaching the levels that prevailed before the war, when the Strait was transporting about 20 million barrels per day, that is, approximately one-fifth of the global oil and liquefied natural gas supplies.

Saudi Arabia increases supply

In parallel, Saudi Arabia began increasing its actual exports to Asian markets, as Bloomberg reported that Aramco sold at least 6 million barrels of crude oil on an immediate basis to customers in China, Japan, and South Korea, in an unusual step for the company that often relies on long-term supply contracts.

Aramco also resumed loading operations from Ras Tanura Port, the largest oil export terminal in the Arabian Gulf, in an indication that shipping operations are returning to normal after security tensions subside.

The increase in supplies was not limited to Saudi Arabia, as the Abu Dhabi National Oil Company (ADNOC) also intensified its spot sales in recent weeks, in conjunction with proposals to link its official prices to the Dubai reference index.

Preparations for the OPEC Plus meeting coincided with the escalation of controversy over the production quota system within the organization, after Reuters revealed last week that Iraq had considered all options, including withdrawal from OPEC, if it did not obtain a significant increase in its production quota.

But Baghdad was later quick to confirm that it was committed to its membership, while calling for a re-evaluation of the baselines on which production quotas are based, in a way that reflects the current capabilities of member states.

The Alliance is currently conducting a comprehensive review of the production capacity of member states in preparation for adopting new baselines starting in 2027, a file that is considered one of the most sensitive issues within the organization.

Standard withdrawal

Meanwhile, the United States continues to use its strategic oil reserves, which played a major role in calming markets during the war.

US Energy Information Administration data showed a decline in the strategic stockpile to about 340.3 million barrels, the lowest level since 1983, after successive withdrawals were implemented within an American plan that included the release of 172 million barrels, as part of a coordinated move with the International Energy Agency to release about 400 million barrels of crude oil and petroleum products.

Although the reserve remains above the minimum set by Congress, its decline to these levels reflects the extent of reliance on strategic reserves to contain the oil market turmoil during the past months.

Venezuela’s exports decline

In Venezuela, oil exports declined during June to about 1.2 million barrels per day, compared to 1.24 million barrels per day in May, after earthquakes that struck the country caused the disruption of shipping operations at some stations affiliated with the National Oil Company.

Despite the overall decline, shipments to the United States rose to about 630,000 barrels per day, while exports to India fell to 277,000 barrels per day. Chevron’s exports of Venezuelan crude also increased to about 293,000 barrels per day, while international trading companies, including Vitol and Trafigura, continued to transport large quantities of Venezuelan oil to international markets.

Russian imports

In Russia, Ukrainian attacks on refineries led to a fuel shortage, forcing Moscow to import gasoline by sea from India for the first time, with plans to import about 400,000 tons per month from several countries, including Belarus.

On the other hand, India continued to increase its purchases of Russian oil, bringing imports to a record level of about 2.7 million barrels per day during June, which made Russian crude constitute more than half of its oil imports.