OPEC+ warned that damage to Middle East energy assets will have a prolonged impact on oil supply even after the Iran war ends, as it approved a symbolic increase in output quotas for next month.
“Restoring damaged energy assets to full capacity is both costly and takes a long time,” the group's ministerial monitoring committee said in a statement after meeting on Sunday. Any action that jeopardizes security of supply, whether that's an attack on infrastructure or disruption of export routes, increases market volatility and weakens OPEC+'s efforts, it said.
Key producers led by Saudi Arabia and Russia agreed to increase targets for May by about 206,000 barrels a day during a video conference. With oil exports from the Persian Gulf throttled by the war and top regional producers forced to curtail supplies, such a move by the group is theoretical. Yet it may signal their intention to revive output once hostilities ease.
Oil prices have been roiled by five weeks of conflict, climbing to almost $120 a barrel last month as key Gulf energy assets came under attack and Iran effectively closed the critical Strait of Hormuz, creating what the International Energy Agency called the biggest supply disruption in the history of the market.
“The real story is not OPEC+ policy, it is the Strait of Hormuz,” said Jorge Leon, head of geopolitical analysis at Rystad Energy. “In a market where up to a fifth of global oil flows through Hormuz, disruptions there largely outweigh any incremental increase the group can announce.”
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Benchmark Brent futures settled near $109 last week after US President Donald Trump vowed an escalation in the war, which could prolong disruptions to energy flows through the vital waterway. He subsequently threatened to unleash “all hell” on Iran, saying the time left on a 10-day deadline for it to make a peace deal with the US was running out.
OPEC Actions
Before the conflict erupted, eight major nations from the Organization of the Petroleum Exporting Countries and its partners had been gradually restoring supply halted back in 2023. They held production steady for the first three months of this year, then on March 1 — a day after the initial US and Israeli strikes on Iran — they agreed to a 206,000-barrel-a-day increase for April.
“We will monitor the situation and take all necessary measures to balance the market,” Russian Deputy Prime Minister Alexander Novak said in an interview with state television channel Rossiya 24 on Sunday. “The market is clearly unbalanced. This has a significant impact on demand globally, not only in the energy markets, but also in the economy and the final supply.”
Producers around the Persian Gulf have cut oil output by about 10 million barrels a day, equivalent to roughly 10% of global supplies, the IEA said in mid-March. With Hormuz largely off-limits, Saudi Arabia has rerouted some shipments to a terminal on its Red Sea coast, while the United Arab Emirates has ramped up exports from a port at Fujairah.
The OPEC+ monitoring committee commended those efforts, saying they contributed to reducing market volatility.
Nevertheless, those diversions can't make up for the vast quantities of oil normally shipped through Hormuz where, despite tentative signs of a slight pickup in recent days, traffic remains at a trickle. Tehran is exerting considerable control over the chokepoint, setting up a tolling system and giving preferential treatment to vessels from countries it deems friendly.
The OPEC+ producers discussed the “closure of certain maritime transportation routes” on Sunday, Russia's Novak said after the meeting. “That has a significant impact on volatility.”
Russia itself is also facing supply disruptions, with Ukraine continuing to target the country's energy infrastructure and major export terminals.
With the 206,000-barrel increment for May now ratified, OPEC+ will have formally restored roughly half of a second tranche of production shuttered since 2023, leaving members with another 827,000 a day of these layers left to restart.
The wider 22-nation OPEC+ coalition has, at least on paper, another set of output curbs dating back to 2022.
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