Russia and Saudi Arabia will each be able to increase oil production in July by 62 thousand b/d compared to June, reaching 9.82 million and 10.35 million b/d respectively. The quota for Iraq has been increased by 26 thousand b/d to 4.37 million b/d, for Kuwait by 16 thousand b/d to 2.64 million b/d, for Kazakhstan by 10 thousand b/d to 1.6 million b/d, for Algeria by 6 thousand b/d to 995 thousand b/d, and for Oman by 5 thousand b/d to 831 thousand b/d.
These figures do not account for the compensation schedule for prior overproduction. The OPEC+ report states that the compensation period has been extended to the end of December 2026.
As noted in the OPEC+ statement, the member countries of the alliance will continue to monitor and assess market conditions, emphasizing the importance of a cautious approach and maintaining full flexibility regarding increasing, suspending, or canceling voluntary production adjustments.
The quotas for August will be determined at the OPEC+ meeting on July 5.
Andrey Polishchuk, chief analyst for the oil and gas and transportation sectors at Euler, believes that the easing of restrictions will continue at the same pace until September. "There may be a pause afterward, and the cartel might return to reducing restrictions in 2027 if demand growth expectations are confirmed," he says. According to Argus, if OPEC+ countries continue to raise quotas at the current rate, the reduction of the last package of voluntary restrictions could be concluded by September.
Argus indicates that decisions to increase production targets remain more of a "theoretical exercise" for Saudi Arabia, Iraq, and Kuwait, which have had to cut production due to the conflict in the Middle East and the closure of the Strait of Hormuz. A source from the agency noted that the lifting of restrictions should be viewed as groundwork for increasing production by these countries once the strait reopens.
According to Argus estimates, in May, the total oil production of the OPEC+ countries amounted to 29.53 million b/d, which is 9.6 million b/d lower than before the onset of military operations in the Middle East, primarily due to cuts in the Persian Gulf countries.
Specifically, Argus data shows that oil production in Saudi Arabia rose by 250 thousand b/d in May compared to April, reaching 6.57 million b/d, but remained 3.66 million b/d below the target. In Iran, production fell by 300 thousand b/d to 2.65 million b/d. According to Argus, production in Russia remained at 9 million b/d.
Sergey Tereshkin, CEO of Open Oil Market, stated that the increase in production targets will enable OPEC+ countries to boost supply after the reopening of the Strait of Hormuz without destabilizing the market, as the increase in production will align with previously announced frameworks. "Overall, such a strategy is quite rational; it will allow future market share increases without shocks, as was the case in March 2020 during the first breakdown of the deal," he said. That year, Russia announced its exit from the OPEC+ deal on April 1, with a new agreement reached from May 1.
Igor Yushkov, an expert at the Financial University, also believes that raising quotas to levels that do not impose restrictions on anyone helps avoid future market shocks, especially after the reopening of the Strait of Hormuz, when prices may tend to decrease anyway. The expert notes that Russia has not been complying with its quotas for several months due to a lack of investment in the sector and attacks on infrastructure, so returning to production above 9 million b/d would be a positive outcome.
Source: Kommersant
