The OPEC+ alliance, which includes Russia, has raised its oil production ceiling in July by 188,000 barrels per day (bpd), mirroring the increase from the previous month. Restrictions on production in the Gulf states remain in place due to the blockage of the Strait of Hormuz. However, experts suggest that the increase in quotas should facilitate future supply growth without shocking the market. According to the alliance's statement, OPEC+ countries, including Russia, will be allowed to boost oil production in July by 188,000 bpd, following similar increases for June. In May, OPEC+ countries raised their quotas by 206,000 bpd, which accounted for the UEA's production levels before its exit from OPEC and OPEC+ on April 28. Russia and Saudi Arabia are set to increase their oil production by 62,000 bpd each in July compared to June, reaching 9.82 million and 10.35 million bpd, respectively. The quota for Iraq has been raised by 26,000 bpd to 4.37 million bpd, while Kuwait's quota is up by 16,000 bpd to 2.64 million bpd. Kazakhstan’s quota increases by 10,000 bpd to 1.6 million bpd, Algeria's by 6,000 bpd to 995,000 bpd, and Oman's by 5,000 bpd to 831,000 bpd. These figures do not take into account the schedule for compensations due to previous overproduction. OPEC+ has stated that the compensation period will be extended until the end of December 2026. As highlighted in OPEC+’s statement, member countries will continue to monitor and assess market conditions, reinforcing the importance of a cautious approach and maintaining full flexibility when it comes to increasing, suspending, or canceling voluntary production adjustments. The quotas for August will be finalized during the OPEC+ meeting on July 5. Andrey Polishchuk, a senior analyst in the oil and gas and transportation sectors at Euler, believes that the easing of restrictions will continue at the same pace until September. “Afterwards, a pause may be possible, and the cartel could revert to reducing restrictions in 2027, if expectations for demand growth are confirmed,” he says. According to Argus, if OPEC+ countries continue to raise quotas at the current pace, they will conclude the last package of voluntary restrictions by September. Argus indicates that decisions on increasing production target limits remain more of a “theoretical exercise” for Saudi Arabia, Iraq, and Kuwait, as they had to cut production due to the conflict in the Middle East and the closure of the Strait of Hormuz. An agency source noted that the removal of restrictions should be considered as groundwork for these countries to boost production after the strait reopens. According to Argus estimates, in May, the total oil output of OPEC+ countries was 29.53 million bpd, which is 9.6 million bpd lower than prior to the onset of military operations in the Middle East, primarily due to reductions in Gulf states. Argus reports that Saudi Arabia's oil production in May increased by 250,000 bpd to 6.57 million bpd compared to April, but remained 3.66 million bpd below target levels. Iran's production dropped by 300,000 bpd to 2.65 million bpd. In Russia, according to Argus, production remained at 9 million bpd. Sergey Tereshkin, General Director of Open Oil Market, states that the increase in the production ceiling will allow OPEC+ countries to raise supply after the reopening of the Strait of Hormuz without undermining the market, as the production increase will fall within the previously announced framework. “Overall, this strategy is quite rational: it will allow increasing market share in the future without causing shocks, as was the case in March 2020, during the first collapse of the deal,” he notes. That year, Russia announced its exit from the OPEC+ deal effective April 1, and a new deal was concluded from May 1. Igor Yushkov, a Financial University expert, also believes that raising quotas to levels that do not restrict anyone helps avoid a future market shock, particularly after the reopening of the Strait of Hormuz, when prices could decline anyway. The expert points out that Russia has not met its quotas for several months due to a lack of investment in the sector and attacks on infrastructure, so a return to production above 9 million bpd would be a positive outcome. Source: Kommersant