Bloomberg: OPEC+ admits production increase by 206,000 barrels per day

Global energy markets are watching the moves of the OPEC+ alliance, which is considering raising production quotas for May in a move described as symbolic, reflecting producers’ readiness to deal with the repercussions of geopolitical tensions in the Middle East, especially as they continue to affect supplies and shipping.

According to Bloomberg, citing informed sources, a core group of coalition members reached a preliminary agreement to increase production by about 206,000 barrels per day, with the decision to be decided during a virtual meeting to be held at a later date.

The increase is an extension of a previous decision taken by the group in April, but it takes on a different significance in light of the escalating regional crisis.

The decision reflects the readiness of producing countries to quickly increase production in the event of the reopening of the Strait of Hormuz, a vital artery through which about 20% of the world’s oil supply passes.

These developments come in light of the repercussions of the war that broke out between the United States and Israel on the one hand, and Iran on the other, which began in late February and resulted in severe turmoil in the global energy market.

This confrontation has led to millions of barrels per day exiting the market, causing prices to soar to their highest levels in years, along with a marked shortage of fuel supplies in countries that rely on the passage of oil and gas through the strait.

In a related context, US President Donald Trump stepped up his tone, vowing to deal heavy blows to Iran within weeks, without presenting a clear plan to reopen the strait, adding to the uncertainty in the markets.

Earlier, he also floated the idea of other countries taking responsibility for securing maritime navigation in the region.

Despite the big jumps in spot oil prices, futures also rose, but at a slower pace, suggesting a cautious outlook among investors.

Oil for October delivery, a key indicator of energy companies’ decisions to increase drilling, is trading at $73.64 a barrel, up nearly 13% from pre-crisis levels.

With these prices, some producers are more likely to return to rig operation in order to take advantage of higher returns.

However, challenges remain, especially with part of Russian production disrupted by drone attacks, adding to the strain on global supplies.

Although some members of the alliance, such as Russia, Kazakhstan, Algeria, and Oman, haven’t been directly affected by the closure of the Strait of Hormuz, their ability to increase production remains limited, limiting the impact of any expansionist decisions in the short term.

Overall, the upcoming OPEC+ move seems more like a reassuring message to the markets than a real change in the balance of supply, pending the outcome of geopolitical developments, especially with regard to the reopening of one of the world’s most important oil corridors.