OPEC+ meets Sunday; oil production increase expected in August

The OPEC+ alliance is expected to green-light a daily production increase of 188,000 barrels starting in August at its meeting on Sunday. Oil prices have declined as traffic through the Strait of Hormuz recovers and supply increases.

Global oil markets are focused on the OPEC+ alliance's meeting on Sunday. According to three sources speaking to Reuters, the alliance's seven largest producers are preparing to raise their daily output targets by about 188,000 barrels in August.

This increase is the same magnitude as that approved in June and July. If confirmed, total production increases since April would reach 1 million barrels per day. The move is part of a plan to gradually unwind the voluntary cuts of 1.65 million barrels per day initiated in 2023.

Prices Return to Pre-War Levels

Oil prices have fallen sharply in recent weeks as geopolitical risks have eased. Brent crude fell below $72 a barrel, while West Texas Intermediate (WTI) traded at $68.30. Both benchmarks have thus given back almost all the premiums gained during the war.

Among the main reasons for the pressure on prices are the normalization of traffic through the Strait of Hormuz, the US military presence making navigation safe, and the activation of alternative export routes. A US official speaking to Bloomberg said the amount of oil shipped through the strait in recent weeks has exceeded 10 million barrels per day. The official added that about 5 million barrels per day are also being shipped via alternative routes, and total flows are approaching the pre-war level of 20 million barrels per day.

Spot Moves from Saudi Arabia and UAE

Saudi Arabia has begun increasing its actual exports to the Asian market. According to Bloomberg, state company Aramco sold at least 6 million barrels of crude oil in the spot market to customers in China, Japan, and South Korea. The move by a company that normally works with long-term contracts drew attention. Aramco also resumed loading operations from Ras Tanura, the largest oil terminal in the Persian Gulf.

The United Arab Emirates' national oil company ADNOC has also stepped up spot sales in recent weeks. The company also brought up plans to link its official selling prices to the Dubai benchmark index.

Iraq's Quota Response: 'All Options on the Table'

Iraq's discontent with the quota system has surfaced ahead of the OPEC+ meeting. Reuters reported last week that the Baghdad government is considering all options, including withdrawing from OPEC, if a significant increase in its output quota is not achieved. Although Iraq later stated its commitment to membership, it reiterated its demand for a new baseline production level reflecting current capacity. The alliance is currently conducting a comprehensive production capacity review to set new baselines effective from 2027.

US Strategic Reserve at Lowest Since 1983

According to the US Energy Information Administration (EIA), the Strategic Petroleum Reserve has fallen to 340.3 million barrels, its lowest level since 1983. The decline is a result of planned sales during the war, in which Washington released 172 million barrels and, in coordination with the International Energy Agency, put a total of about 400 million barrels on the market. Although the reserve remains above the minimum level set by Congress, it reveals the extent to which stocks were tapped for market stability in recent months.

Venezuela Exports and Russia-India Flow

Venezuela's oil exports fell to 1.2 million barrels per day in June as earthquakes caused disruptions at loading terminals. In contrast, shipments to the US increased to about 630,000 barrels per day. Chevron's crude output from Venezuela reached 293,000 barrels per day.

On the Russian front, Ukrainian attacks on refineries have caused fuel shortages. Moscow has begun importing gasoline from India by sea for the first time, and is planning to supply about 400,000 tons per month from various countries, including Belarus. Meanwhile, India's demand for Russian oil has hit a record: imports peaked at 2.7 million barrels per day in June, accounting for more than half of the country's total crude oil imports.