OPEC+ agrees to boost oil output when Strait of Hormuz reopens

OPEC+ has agreed to increase its oil output quotas by 206,000 barrels per day for May. However, due to the U.S.-Israeli war with Iran, key members like Saudi Arabia, the United Arab Emirates, Kuwait, and Iraq are unable to raise production levels.

The conflict has led to the closure of the Strait of Hormuz, a crucial oil route, since February, resulting in reduced exports from OPEC+ countries. As a result, crude prices have surged to nearly $120 a barrel, impacting global consumers and businesses.

The increase in OPEC+ quotas is seen as symbolic, as it represents a small fraction of the disrupted supply caused by the Hormuz closure. Energy experts believe that the additional barrels will have little impact as long as the strait remains closed.

Despite the quota increase, challenges persist for OPEC+ members in ramping up production. Factors like Western sanctions on Russia and infrastructure damage from the conflict with Ukraine hinder efforts to boost output.

The ongoing war has caused significant damage to energy infrastructure in the Gulf region, making it difficult for countries to resume normal operations even if the conflict ends and the strait reopens.

Iran has exempted Iraq from restrictions on transiting Hormuz, but concerns remain about the safety of shipping routes in the region. The war has disrupted oil flows, leading to the largest oil supply disruption on record.

If the disruptions in Hormuz continue into mid-May, oil prices could spike above $150, according to JPMorgan. OPEC+ comprises 22 members, with the eight countries involved in monthly production decisions focusing on regaining market share.

The eight members are set to meet again on May 3 to discuss further production adjustments.