OPEC+ raises output 188,000 bpd for sixth month as quota talks loom

OPEC+ is completing its planned return of withheld barrels to the market, but the easy part of the unwind is over.

Seven OPEC+ members will raise crude output by 188,000 barrels a day in September, completing the unwind of 1.65 million bpd in voluntary cuts agreed in 2023.

"Iraq is one of the founding members of Opec ... our right is to receive a fair share for Iraq," Ali Al Zaidi, Iraq's prime minister, said at the White House in July, as Baghdad pushes for higher production quotas to fund its battered economy.

Saudi Arabia, Russia, Iraq, Kuwait, Kazakhstan, Algeria and Oman agreed to the increase at a virtual meeting Sunday, the sixth consecutive monthly hike. Before the UAE exited the cartel in April, OPEC+ had raised output by 206,000 bpd for each of April and May. The seven countries said the increase would give participants "an opportunity to accelerate their compensation" for earlier overproduction. The group will pause increases in the fourth quarter, leaving roughly 2 million bpd of cuts from 2022 intact.

The decision lands as Brent crude closed July with a 24 percent monthly gain — the largest since March — while WTI climbed 21 percent. The Strait of Hormuz, through which a fifth of the world's oil and gas passed before the conflict began on February 28, still sees minimal shipping traffic. The group meets next on September 6 to decide October production levels.

Quota battles ahead

Iraq's demand for a higher baseline highlights the tension building within the group. The country, one of OPEC's founding members, has been producing above its assigned target and wants its quota raised to reflect actual capacity. Similar pressure from the UAE — which left the cartel in April after failing to secure a higher baseline — shows the stakes for members seeking to monetize spare capacity.

The compensation mechanism adds another layer of complexity. Countries that overproduced in prior months must offset those barrels against future increases, a process that could slow the group's return to full production even as quotas are adjusted. The seven countries said the September increase would help accelerate this compensation process, but the question is whether Iraq and others can meet their obligations while also pushing for higher baselines.

Hormuz traffic remains thin

The uneasy pause in the US-Iran war keeps the market on edge. President Donald Trump said Sunday he halted military strikes on Iran after Washington and Tehran agreed on "the perimeters of a deal," including the "immediate, complete, and total opening of the Hormuz strait" and an end to Iran's nuclear threat. The two sides had earlier signed a 14-point framework agreement and a 60-day ceasefire that unravelled, leading to 13 consecutive nights of retaliatory strikes in July.

Yemen's Houthi rebels have added another layer of supply risk, blockading Saudi shipping in the Red Sea and attacking tankers passing through the Bab Al Mandeb strait. The combination of reduced Hormuz traffic and Red Sea disruptions has kept a geopolitical risk premium embedded in crude prices even as OPEC+ adds barrels. Oil futures slipped after the OPEC+ announcement but held near pre-conflict levels, according to market data.

The production increase is unlikely to meaningfully pressure prices while Hormuz traffic remains constrained. If the US-Iran deal holds and shipping normalizes, the additional barrels could weigh on crude in the fourth quarter. If talks collapse, the group's ability to add supply will be tested by infrastructure damage and insurance constraints in the region.

This article is for informational purposes only and does not constitute investment advice.