The Organization of the Petroleum Exporting Countries (OPEC) and OPEC+, a consultative body of major oil producers, are expected to move to increase crude output for a fifth straight month.
However, some expect the oil market could enter an oversupply phase next year if production fully recovers as the Strait of Hormuz returns to normal.
According to AFP on the 5th (local time), energy Ministers from seven OPEC+ members, including Saudi Arabia and Russia, are scheduled to hold a videoconference that day to discuss the August crude production target.
Giovanni Staunovo, a commodities analyst at Swiss investment bank UBS, expected OPEC+ to continue raising output by the same magnitude as in recent months. He projected an increase of 188,000 barrels a day, saying, "Current production still appears to be falling short of OPEC+'s target."
OPEC+ decided to raise output for four consecutive months starting in April to stabilize the market after international oil prices surged when the Strait of Hormuz, a key crude shipping route, was shut due to the Iran war.
But as passage through the strait ran into snags, actual production fell instead. According to OPEC data, crude production in Saudi Arabia, Iraq, and Kuwait decreased by 6 million barrels a day from the first quarter through May this year.
Ole Hansen, a commodities analyst at Saxo Bank, assessed that crude currently passing through the Strait of Hormuz is drawn from existing storage and that time is needed for production to recover. He projected, "If normalization of the strait continues, production will improve from July and the recovery will accelerate in August."
However, AFP noted that if production continues to recover, an oil oversupply could materialize next year. Jorge Leon, an analyst at energy intelligence firm Rystad, said, "Everyone expects an oversupply next year."
While countries refill crude inventories that declined during the Strait of Hormuz shutdown, the increased supply can be absorbed, but afterward downward pressure on prices could build due to rising production.
AFP also reported that this situation could strain OPEC+'s internal cohesion. In May, the United Arab Emirates (UAE) left OPEC+, weakening the group's clout, and Iraq, having suffered export losses from the war, is said to be pressuring that it could also consider leaving unless its production quota is raised.