OPEC+ approves small September quota hike to complete 2023 cut rollback

OPEC+ approved a 188,000 bpd output hike for September, completing its planned 2023 supply revival while keeping options open after Middle East tensions ease

Major OPEC+ nations approved the latest small increase to their production quotas, a move that will complete the theoretical revival of supplies halted in 2023 and give them scope to add more barrels once the Middle East war ends. 

Seven members led by Saudi Arabia and Russia agreed to boost their collective target by a further 188,000 barrels a day next month, the group said following a video call on Sunday. The group has raised quotas each month throughout the Iran war even as supply from the region remains constrained by the conflict. Bloomberg reported last week that OPEC+ currently plans to hold levels steady for the rest of the year after the September hike.  

 

While the increase is symbolic for now, it may give Saudi Arabia leeway to raise production once oil flows from the Persian Gulf return to normal, helping to replenish the world’s depleted stockpiles. A supply squeeze triggered by conflict is pushing up the cost of fuels like gasoline and diesel, stoking fears of another spike in inflation. 

President Donald Trump said this weekend the US will hold off new strikes against Iran after the Islamic Republic and other Middle Eastern nations told him they’re working toward a deal.  

An eventual supply boost by the Organization of the Petroleum Exporting Countries and its partners could help to rekindle a surplus that was expected to hit the oil market this year prior to the Iran war. There was a brief glimpse of that when a temporary surplus emerged during the recent ceasefire between the US and Iran, with millions of trapped barrels flowing out of Hormuz.  

The exit of the United Arab Emirates in May, following years of frustration with OPEC-imposed limits, has also spurred speculation the group could one day be plunged into a contest over market share. 

The sub-group of seven nations will continue to hold monthly meetings, with the next one scheduled for Sept. 6. 

Middle East OPEC+ members Saudi Arabia, Iraq, Kuwait and Iran were able to restore some output halted by the war during a June ceasefire between Tehran and the US, but the revival was stymied again when renewed hostilities once again disrupted Strait of Hormuz and spread to the Red Sea.  

The Yemen-based Houthi group linked to Iran has announced a blockade of Saudi ports, threatening the Red Sea export route the kingdom has used as an alternative to the Persian Gulf.  

Cuts Unwound 

The 188,000 barrels-a-day increase scheduled by OPEC+ for September completes — if only on paper — the reversal of two layers of production cuts made in 2023 when the coalition was seeking to stave off a glut. Excluding the UAE’s share, these curbs amounted to about 3.5 million barrels a day, though far less has been revived in reality as technical constraints prevent many countries from boosting output by as much as they’re allowed. 

Delegates said last week that after a September increase, output quotas are expected to remain steady until the end of the year, in keeping with plans to keep a third layer of idle supply halted after it was taken offline in 2022. The plan could still change depending on circumstances, one of the delegates said.  

As with the first two layers, many OPEC+ nations would struggle to revive much of this final tier, given the deterioration in their capacity in recent years. Even before the war forced Persian Gulf producers to shutter output, the vast majority of idle capacity in the alliance was held by Saudi Arabia.  

Russia has been pumping considerably below its permitted level for some time as it wrestles with sanctions imposed following its invasion of Ukraine, data from the International Energy Agency indicate.  

Kazakhstan has been forced to reduce production amid a series of attacks on ships loading oil at or nearby the Caspian Pipeline Consortium terminal on Russia’s Black Sea coast, which handles about 80% of Kazakhstan’s crude exports. In any case, the country has consistently flouted its OPEC+ quota, limiting the relevance of any increases in its formal target. It pumped 1.9 million barrels a day in May, according to the IEA. 

How much crude OPEC+ permits members to pump next year will be heavily influenced by the results of a review of their maximum capacity levels. The audit, being conducted by Dallas-based consultant DeGolyer and MacNaughton Corp., is due to be completed in September and reviewed by minsters at their meeting in late November.  

In June, Iraq warned it could consider following the UAE in exiting OPEC — despite having helped create the organization in 1960 — if denied a sufficiently high quota baseline, but subsequently tempered the threat.