After U.S.-Israel airstrikes on Iran pushed Middle East tensions higher, OPEC+ agreed to increase output by 206,000 barrels per day starting in April. However, analysts say if disruptions to traffic in the Strait of Hormuz continue, there are limits to fully calming oil-price volatility.
The Organization of the Petroleum Exporting Countries (OPEC) and OPEC+, a coalition of major oil producers including Russia, said on the 1st local time that they decided to add 206,000 barrels per day to production starting in April. That is larger than the monthly hike of 137,000 barrels per day applied in the fourth quarter of last year.
OPEC+ had suspended production increases in the first quarter of this year and had been reviewing resuming its existing plan from April. The decision is seen as an effort to stabilize the market as supply concerns have grown amid military clashes between the United States-Israel and Iran.
In particular, with traffic in the Strait of Hormuz—through which about 20% of the world's seaborne crude flows—effectively halted, concerns about global supply disruptions are spreading.
OPEC+ did not directly mention the Iran situation in its statement that day but stressed a "stable global economic outlook and sound market fundamentals."
However, considering that global crude supply exceeds 100 million barrels per day, the size of the increase amounts to only about 0.2%, and the impact may be limited.
Experts say the direction of oil prices ultimately hinges on the situation in the Strait of Hormuz. If tanker traffic is not smooth, actual export volumes could be constrained even if production rises, and higher insurance premiums, securing alternative routes, and loading delays could also fuel market anxiety.
Jorge Leon, a geopolitical analyst at Rystad Energy, told the Wall Street Journal, "Under normal circumstances, a larger increase would put downward pressure on prices, but if constraints in the Strait of Hormuz prevent Gulf crude from leaving, the immediate effect will be limited."
According to Reuters, Brent crude, the international benchmark, traded around $80 per barrel in weekend over-the-counter trading, up 8% to 10%.