The future of the Strait of Hormuz is uncertain, but OPEC+ will hold a meeting on Sunday to discuss increasing production.

China Financial News (4月3, Editor: Malan) The Strait of Hormuz shipping lane has been disrupted, causing nearly one quarter of global oil and about one fifth of natural gas transport to be obstructed, as Gulf countries move ever closer to the limits of their storage capacity.

However, according to two people familiar with the matter, OPEC+’s eight member countries will hold a meeting on Sunday, at which time they may consider further increasing oil output. This move is mainly intended to allow key oil-producing countries to quickly ramp up exports when the Strait of Hormuz reopens.

At a meeting held on March 1, OPEC+ agreed to make a modest increase of 206,000 barrels per day in April, but due to the impact of geopolitical conflicts, this production-increase agreement was not implemented. Instead, major oil producers such as Saudi Arabia, Iraq, Kuwait, and the UAE cut their oil production.

The sources said that although there is currently no confirmed information on the reopening of the strait, OPEC+ may agree to announce an increase on paper, indicating that the group is already prepared. Once tankers are able to resume passage through the strait, the group would immediately raise production. But this plan would not affect existing supply.

A more flexible stance
Because Iran announced that it would jointly supervise the Strait of Hormuz for shipping with Oman, investors rekindled hopes that the route might be partially reopened, and Asia-Pacific markets generally rose on Friday. The day before, Brent crude oil surged to as high as $141 per barrel on Thursday after U.S. President Trump said he would continue to target Iran, and Asia-Pacific markets suffered a bloody sell-off.

The meeting this Sunday will typically determine May’s production quotas. Consulting firm Energy Aspects expects that OPEC+ will announce a further increase of 206,000 barrels per day in May, but emphasized that as long as disruptions related to the Strait of Hormuz continue, all of this remains talk on paper.

OPEC+ has 22 member countries, but in recent years only eight countries have participated in the monthly production decision-making: Saudi Arabia, Iraq, Kuwait, the UAE, Russia, Kazakhstan, Algeria, and Oman.

The last four member countries are not affected by the interruption of the Strait of Hormuz, but most countries have limited capacity to increase output. Russia, the only country with conditions for rapid exports, is also facing a supply bottleneck because Ukraine has intensified strikes on its energy infrastructure.

In a report, Standard Chartered Bank also noted that the eight OPEC+ member countries may take the opportunity of the next meeting to completely cancel the adjustment and compensatory production cut plan that began in April 2023, at least ostensibly in response to pressure from consumers. While this action will increase complexity in the market, it allows OPEC+ to respond flexibly to market conditions.