Seven countries belonging to the Organization of the Petroleum Exporting Countries (OPEC) and OPEC+, a group of major oil producers, moved to expand their oil production targets for the fifth straight month.
According to Reuters and Agence France-Presse, OPEC+ member states held a videoconference on the 5th (local time) and agreed to increase August oil production by 188,000 barrels per day from July.
In a statement, the seven countries said, "As part of joint efforts to promote stability in the oil market, we decided to make a production adjustment of 188,000 barrels per day in relation to the voluntary additional output cut measures released in April 2023."
OPEC+ implemented voluntary production cuts twice in 2023, then has increased output since last year by partially reversing them.
After halting output increases in the first quarter of this year, it decided to boost production for four consecutive months starting in April, when the Strait of Hormuz, a key oil trade route, was blocked following the outbreak of the Iran war.
With international oil prices surging, it has raised monthly quotas to stabilize the market.
But with crude exports blocked, actual oil production fell instead.
According to OPEC data, output in three countries—Saudi Arabia, Iraq, and Kuwait—fell by 6 million barrels per day from the first quarter of this year through May.
Ole Hansen, an analyst at Saxo Bank, said the crude currently passing through the strait is from volumes stored in storage facilities and noted that "it takes time to restart production."
Hansen said, "Assuming conditions in the strait continue to normalize, we will see improvement in July and an acceleration of the recovery in August."
AFP noted, however, that at this pace the market could face a glut next year.
Jorge Leon, an analyst at energy intelligence firm Rystad, said, "Everyone expects a glut next year."
As countries begin to refill crude inventories depleted while the Strait of Hormuz was closed, they may be able to absorb supply volumes for the time being, but later there could be downward pressure on prices from increased production.
AFP said that if that happens, OPEC+, whose grip has already weakened after the UAE's withdrawal in May, would face a situation where it must manage falling prices amid member states' calls for more output.
One member, Iraq, is already reported to be pressuring the group by stressing it suffered losses because war halted its exports and saying it could withdraw unless its oil production quota is raised.