8 Opec+ nations boosts oil production amid rising tensions in West Asia

The Opec, in a meeting planned before the war began, said it would increase production by 206,000 barrels per day in April, which was more than analysts had been expecting

Eight countries that are part of the Opec+ oil cartel announced Sunday they will boost production of crude as US and Israeli forces launched a major attack on Iran and the country responded with retaliatory strikes against Israel and US military installations around the Gulf, disrupting oil shipments from the region.

The Organisation of Petroleum Exporting Countries, in a Sunday meeting planned before the war began, said it would increase production by 206,000 barrels per day in April, which was more than analysts had been expecting. The countries boosting output include Saudi Arabia, Russia, Iraq, the United Arab Emirates, Kuwait, Kazakhstan, Algeria and Oman.

 

Attacks throughout the region, including on two vessels travelling through the Strait of Hormuz, the narrow mouth of the Persian Gulf, could restrict countries' ability to export oil to the rest of the world. That would will likely result in higher prices for crude oil and gasoline, according to energy experts.

Roughly 15 million barrels of crude oil per day - about 20 per cent of the world's oil - are shipped through the Strait of Hormuz, making it the world's most critical oil chokepoint, according to Rystad Energy. Tankers travelling through the strait, which is bordered in the north by Iran, carry oil and gas from Saudi Arabia, Kuwait, Iraq, Qatar, Bahrain, the UAE and Iran.

Iran had temporarily shut down parts of the strait in mid-February for what it said was a military drill. Further disruptions to that shipping channel could lead to lower supply and higher prices for oil.

"Roughly one-fifth of global oil supply passes through the Strait of Hormuz, a vital artery for world trade, meaning markets are more concerned with whether barrels can move than with spare capacity on paper," said Jorge Leon, Rystad's senior vice president and head of geopolitical analysis, in an email. "If flows through the Gulf are constrained, additional production will provide limited immediate relief, making access to export routes far more important than headline output targets."  Iran exports roughly 1.6 million barrels of oil a day, mostly to China, which may need to look elsewhere for supply if Iran's exports are disrupted, another factor that could increase energy prices.

Energy experts believe oil prices could shoot higher when barrels begin trading late Sunday. Analysts at Rystad anticipate the price of a barrel of Brent crude, the international standard, could increase by $20 when trading opens.

A barrel of Brent crude closed at a seven-month high of $72.87 on Friday.