OPEC+ approves an increase in crude oil supply in May despite the war

BarcelonaThe OPEC+ alliance, led by Saudi Arabia and Russia, agreed this Sunday to increase its oil production by 206,000 barrels per day starting May 1, despite the war in Iran. In fact, the agreement is little more than a symbolic gesture, because the implementation of the increase will not be possible while the war continues and the Strait of Hormuz remains blocked, through which much of the oil from the members of the oil cartel exits to the markets.

The decision was adopted in a teleconference by the Ministers of Energy and Petroleum of Saudi Arabia, Russia, Iraq, the United Arab Emirates, Kuwait, Kazakhstan, Algeria, and Oman, the Organization of the Petroleum Exporting Countries (OPEC) reported in a statement.

The eight countries "have expressed their concern over attacks on energy infrastructure, noting that the restoration of damaged energy assets to their full capacity is costly and time-consuming, affecting overall supply availability.

Consequently, the cartel countries have highlighted that any action undermining the security of energy supply, through attacks on infrastructure or disruption of international shipping routes, "increases market volatility and weakens the collective efforts" of the oil alliance to stabilize the market, they added. In this context, they emphasized "the critical importance of safeguarding international shipping routes to ensure the uninterrupted flow of energy."

The statement from the virtual meeting refers, without explicitly mentioning it, to the severe global energy crisis triggered by the war that began on February 28 with bombings by the United States and Israel in Iran. The Iranian blockade of the Strait of Hormuz, through which 20% of the world's traded oil – and gas – normally passes, and cross-border attacks on sector facilities have reduced supplies from key OPEC members such as Saudi Arabia, Iraq, the United Arab Emirates, and Kuwait.

Added to this are the damages caused to Russia's oil facilities by Ukrainian attacks, and the remaining three countries in the group – Kazakhstan, Algeria, and Oman – have very limited capacity to increase production. In this situation, and with no end to the armed conflicts in sight for now, the group will not be able to implement the monthly increase agreed upon this Sunday, just as the one that came into effect on the 1st of last month, also of 206,000 barrels per day, is estimated not to be being applied either.

According to analysts, the decision to continue with a plan launched last year to reverse the voluntary pumping cuts that the cartel had adopted in 2023 has, for the moment, a merely symbolic value and is an attempt to send a message of calm to the markets, where the price of crude has soared. Brent crude oil has approached $120/barrel in March and has accumulated a 63% increase, its largest monthly increase since 1988, while West Texas Intermediate (WTI), the benchmark in the United States, exceeded $111/barrel.