OPEC+ plans to continue increasing crude oil production quotas, but geopolitical conflicts hinder the implementation of production increases.

This round of production increase remains a policy on paper, with actual implementation facing practical obstacles.

Multiple representatives revealed that major member countries of OPEC+ plan to continuously increase crude oil production quotas in the coming months, aiming to restore part of the previously halted production capacity by the end of September. However, this round of production increase remains a nominal policy, as its implementation faces practical obstacles.

OPEC+ Continues to Advance Production Resumption

OPEC+ has officially agreed to restore approximately two-thirds of the one million six hundred fifty thousand barrels per day (1.65 million bpd) oil production cut target set for 2023. Three representatives stated that the organization plans to further raise production targets in three monthly phases to complete the resumption of the remaining capacity. However, the reality is that due to the impact of Iran’s situation on Persian Gulf crude oil exports, major member states are actually unable to fulfill their production increase quotas.

The OPEC+, led by Saudi Arabia and Russia, maintained small-scale and symbolic nominal production increases during this period of geopolitical conflict. Nevertheless, the global market urgently needs more crude oil to fill the gap caused by this conflict. This conflict has resulted in a cumulative shortfall exceeding one billion barrels and caused global inventories to decline at a record pace. Oil prices have thus soared significantly, exacerbating the risk of a global economic recession.

Before the outbreak of the U.S.-Israel-Iran conflict on February 28, eight major OPEC+ member states were already in the process of resuming production, gradually restarting capacities shut down years ago in response to a crude oil supply surplus.

Starting from this month, OPEC+ has lost one member: The United Arab Emirates officially withdrew from OPEC after decades of membership, due to disagreements with the organization’s leading country, Saudi Arabia, over oil production quota restrictions.

Despite the UAE’s withdrawal, the remaining seven major member states approved a plan at the monthly video conference on May 3 to increase production by 188,000 barrels per day in June, although this is merely a nominal increase. The next meeting is scheduled for June 7, where policies for July and subsequent crude oil production will be reviewed.

With the UAE’s exit, the original daily reduction baseline of 1.65 million barrels will theoretically decrease by 144,000 barrels per day.

Geopolitical Conflict Devastates Middle East Crude Oil Production Capacity; Nominal Production Increase Difficult to Implement

In reality, geopolitical tensions and disruptions to shipping through the Strait of Hormuz have rendered OPEC+’s production increase targets agreed upon over the past several months completely unachievable, forcing multiple Middle Eastern oil-producing countries to significantly reduce their capacities.

The monthly report released by OPEC on Wednesday showed that Saudi Arabia’s crude oil production in April fell to 6.3 million barrels per day, the lowest level since 1990; Kuwait’s oil production has dropped to one-quarter of its pre-war levels, while output from Iraq and the UAE has also significantly decreased.

Despite facing dual crises of geopolitical conflicts and the unexpected withdrawal of the UAE, OPEC+ is still formulating its medium- to long-term capacity policies.

Three representatives stated that OPEC+ is reviewing the maximum production caps for each member country (a process initiated last year) with the aim of establishing a more accurate benchmark for production quotas in 2027. This assessment is being conducted by DeGolyer and MacNaughton Corp., a consulting firm based in Dallas.

As of the time of writing, the price of WTI crude oil futures for June delivery fell by 1.12% to $99.89 per barrel, while the price of Brent crude oil futures for July delivery declined by 1.14% to $104.43 per barrel. Since the outbreak of the conflict at the end of February, international oil prices have risen by approximately 50%.