Seven members of the OPEC+ alliance agreed on Sunday to raise their oil production quotas again, signalling confidence in improving conditions across the Gulf following months of disruption caused by the Middle East conflict.
In a statement issued after a virtual meeting, Saudi Arabia, Russia, Iraq, Kuwait, Kazakhstan, Algeria and Oman announced a combined production increase of 188,000 barrels per day, effective from August 2026.
The decision follows a period of reduced oil output after Iran’s actions during the regional conflict severely disrupted shipping through the Strait of Hormuz, a critical route for global energy exports. The near-paralysis of the waterway forced Gulf producers to cut production as exports stalled for several months.
According to OPEC data, combined oil production from Saudi Arabia, Iraq and Kuwait fell by about six million barrels per day between the first quarter of 2026 and May.
Shipping activity has gradually recovered since Tehran and Washington signed a memorandum of understanding on June 17, committing to remove obstacles to maritime traffic through the Strait of Hormuz while negotiations continue.
Commodity analyst Giovanni Staunovo of UBS said current production remains below OPEC+ targets despite the latest quota increase.
The easing of tensions has also pushed oil prices lower, returning them to levels seen before the conflict as markets anticipate a gradual normalisation of exports.
A U.S. official quoted by Bloomberg said oil shipments through the Strait of Hormuz may already have exceeded 10 million barrels per day. However, Saxo Bank analyst Ole Hansen noted that much of the crude currently leaving the strait had been stored in tankers or storage facilities, adding that restarting previously shut-in production would take time.
He projected further improvement in July, with a stronger recovery expected in August if shipping conditions continue to stabilise.
Analysts, however, warned that the market could face oversupply next year.
Jorge Leon of Rystad Energy said global oil markets are widely expected to experience a surplus in 2027. While rebuilding depleted inventories could initially absorb additional supplies, producers may later come under increasing pressure from weaker prices.
The outlook also presents a challenge for OPEC+, which has been grappling with internal strains following the United Arab Emirates’ exit from the alliance in May.
Iraq has already requested a higher production quota to offset losses suffered during the conflict, according to the Iraqi Oil Ministry.
Hansen said the request was unlikely to be addressed immediately because Iraq’s production remains below pre-war levels. Instead, he expects the issue to be considered during OPEC+‘s 2027 production capacity review, when member states’ output baselines and quotas are scheduled for reassessment.
