OPEC's crude oil production rebounded sharply last month, primarily due to Persian Gulf member nations resuming exports through the Strait of Hormuz following a peace agreement between the US and Iran.
According to Bloomberg, OPEC's production in June increased by 2.34 million barrels per day (bpd) to 18.75 million bpd. The main contributors to this rise were Kuwait, Saudi Arabia, and Iran. However, output remains significantly below pre-war levels.
With current weak oil consumption coinciding with the supply rebound, signs of oversupply have emerged in some markets. Brent crude futures traded around $72 per barrel on Friday, erasing gains made during the conflict.
Key members of the broader OPEC+ alliance, which includes Russia, are scheduled to hold a monthly video conference on Sunday to discuss production limits for the coming month, with market expectations leaning towards a continuation of modest output increases.
Production Remains Well Below Pre-Conflict Levels
Despite the substantial monthly increase, OPEC's overall production still lags considerably behind pre-war figures. After adjusting for the United Arab Emirates' exit from the group, OPEC's June output was 7.3 million bpd lower than February levels, representing a 28% decline.
The Strait of Hormuz was largely closed at the onset of the conflict, prompting Persian Gulf oil producers to gradually develop alternative shipping routes.
Following the implementation of the US-Iran agreement, public transit channels have been fully restored. Tanker tracking data indicates Saudi Arabia's oil shipments have recovered to about 90% of their normal levels.
Kuwait Leads Increase, Iran Faces Crude Backlog
On a country-by-country basis, Kuwait recorded the largest increase among OPEC's 11 members in June, with production jumping by 870,000 bpd to 1.36 million bpd. The country's output had previously been cut by approximately 80% due to the conflict and remains notably below its typical level.
Saudi Arabia ranked second with an increase of 550,000 bpd, raising its daily production to 7.2 million barrels. Iran's output grew by 510,000 bpd to 2.85 million bpd. Notably, Iran is currently grappling with a shortage of willing buyers, leaving significant volumes of crude oil stranded in floating storage tankers awaiting sale.
Beyond the production figures, internal political divisions within OPEC warrant attention. The UAE formally exited OPEC in May, granting it the freedom to increase production once the Strait situation is fully stabilized. Iraq has also previously threatened to potentially leave the organization if it fails to secure a higher production quota from the group.
OPEC+ Expected to Proceed with Modest August Increase
Key members of the OPEC+ alliance, including Russia, will convene via a monthly video conference on Sunday to deliberate on production policy for the upcoming month.
This panel of seven major oil-producing nations has announced several rounds of small, symbolic production increases during the war, continuing a process initiated years ago to theoretically restore previously curtailed output volumes.
Two delegates stated this week that an additional quota increase of 188,000 bpd is anticipated to be announced for August, which would be the penultimate stage of this restoration plan.
Regarding other alliance members, Russia's crude oil exports have surged to record highs following Ukrainian attacks on its domestic refineries, as oil that cannot be processed domestically is being redirected for export, further adding pressure to global supply.
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