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- October 21, 202612°
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- October 21, 202612°
OPEC+ meets on Sunday; oil output increase expected in August
The OPEC+ alliance is expected to approve a daily production increase of 188,000 barrels starting in August at its Sunday meeting. Oil prices declined as shipping through the Strait of Hormuz recovered and supply increased.
Global oil markets are focused on the OPEC+ alliance's meeting on Sunday. According to three sources who spoke to Reuters, the alliance's seven largest producers are preparing to raise daily output targets by about 188,000 barrels in August.
This increase matches the amount approved in June and July. If confirmed, the total production increase since April will reach 1 million barrels per day. The move is part of the plan to gradually unwind voluntary cuts of 1.65 million barrels per day, initiated in 2023.
Prices Return to Pre-War Levels
Oil prices have dropped sharply in recent weeks as geopolitical risks eased. Brent crude fell below $72 a barrel, while West Texas Intermediate (WTI) traded at $68.30. Thus, both benchmarks have given back nearly all the premiums gained during the war.
Key factors weighing on prices include the normalization of transit through the Strait of Hormuz, the U.S. military presence making navigation safer, and the activation of alternative export routes. A U.S. official told Bloomberg that the volume of oil shipped through the strait in recent weeks exceeded 10 million barrels per day. The official said alternative routes were shipping about 5 million barrels per day, bringing the total flow close to the pre-war level of 20 million barrels per day.
Spot Moves from Saudi Arabia and UAE
Saudi Arabia has started increasing its actual exports to the Asian market. According to Bloomberg, state oil company Aramco sold at least 6 million barrels of crude on the spot market to customers in China, Japan, and South Korea. The move by the company, which normally operates through long-term contracts, drew attention. Aramco also resumed loading operations from Ras Tanura, the largest oil terminal in the Persian Gulf.
The UAE's national oil company ADNOC also stepped up spot sales in recent weeks. The company also raised plans to link its official selling prices to the Dubai benchmark index.
Iraq's Quota Response: 'All Options on the Table'
Ahead of the OPEC+ meeting, Iraq's discontent with the quota system has surfaced. Reuters reported last week that the Baghdad government was considering all options, including withdrawal from OPEC, if a significant increase in its production quota was not achieved. Although Iraq later affirmed its commitment to membership, it reiterated its demand for a new baseline production level that reflects current capacity. The alliance is currently conducting a comprehensive production capacity review to set new baseline levels, effective from 2027.
U.S. Strategic Reserve at Lowest Since 1983
According to data from the U.S. Energy Information Administration (EIA), the Strategic Petroleum Reserve fell to 340.3 million barrels, the lowest since 1983. This decline is a result of planned sales in which Washington released 172 million barrels during the war and, in coordination with the International Energy Agency, released a total of about 400 million barrels to the market. While the reserve remains above the minimum level set by Congress, it shows the extent to which stocks have been tapped for market stability in recent months.
Venezuela Exports and Russia-India Flows
Venezuela's oil exports fell to 1.2 million barrels per day in June as earthquakes disrupted loading terminals. Meanwhile, shipments to the U.S. rose to about 630,000 barrels per day. Chevron's crude output from Venezuela reached 293,000 barrels per day.
On the Russian front, Ukrainian attacks on refineries led to fuel shortages. Moscow has begun importing gasoline from India by sea for the first time, while planning to supply about 400,000 tons per month from various countries, including Belarus. Meanwhile, India's demand for Russian oil hit a record: imports peaked at 2.7 million barrels per day in June, accounting for more than half of the country's total crude oil imports.
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