Eight OPEC+ countries have raised their maximum oil production level for May by 206,000 barrels per day (b/d), with Russia's quota increased by 62,000 b/d. This adjustment aligns with a similar increase agreed upon by the organization a month prior. Challenges in navigating the Strait of Hormuz hinder some participants from increasing supply in the short term, and a more abrupt quota increase could have led to an oversupply in the market following the resolution of the conflict. For Russia, the potential for increased production hinges on the stability of its exports.
OPEC+ reported that eight countries raised their oil production limit for May by 206,000 b/d following a meeting on April 5. This revision is consistent with the increase made in April. As in the previous month, quotas for both Russia and Saudi Arabia have been raised by 62,000 b/d each. For Russia, the maximum oil production level is set at 9.69 million b/d for May, while Saudi Arabia's is 10.22 million b/d. Quotas for Iraq, the UAE, Kuwait, Kazakhstan, Algeria, and Oman were also raised by the same amount as in April.
OPEC+ officials noted that they will continue to assess market conditions, highlighting the importance of a cautious approach to quota adjustments. However, the alliance expressed concerns regarding attacks on energy infrastructure, indicating that restoring damaged facilities will be a costly and lengthy process. Any actions that undermine energy supply security, whether through attacks on infrastructure or disruptions to international maritime logistics, increase market volatility, as stated in OPEC+'s announcement. The next meeting of the alliance is scheduled for May 3, 2026.
OPEC+ is maintaining the pace of quota increases amid disruptions to oil supplies due to the military conflict in the Middle East. According to Kpler, during the first three weeks of military actions, crude supply has decreased by more than 130 million barrels. By the end of March, cumulative losses could exceed 250 million barrels, and by the end of April, 600 million barrels, if supplies do not resume.
Sergey Tereshkin, CEO of Open Oil Market, points out that leading oil-producing countries in the Middle East cannot guarantee a sharp increase in supply "here and now". Therefore, he states that OPEC+ has taken an "interim" decision to raise quotas to a realistic level that can be met in the event of improved shipping conditions in the Strait of Hormuz. This implies maintaining the status quo for the market: Brent prices will likely remain near $110 per barrel. After the acute phase of the conflict ends, alliance countries should be able to increase supply without exceeding the quotas, Tereshkin continues.
Andrei Polishchuk, senior analyst in the oil and gas sector at Euler, notes that more radical steps could lead to an oversupply once the situation in the Strait of Hormuz normalizes. Igor Yushkov, an expert at the Financial University under the Government of the Russian Federation, adds that OPEC+'s decision to increase quotas at a time when many Persian Gulf countries cannot maximize their utilization demonstrates the alliance's intent to showcase control over the situation. However, he cautions that the longer the conflict persists, the more damage the region's oil infrastructure endures, raising questions about how much crude these countries will actually be able to export once the Strait of Hormuz reopens.
Nevertheless, Kirill Bakhtin, head of Russian equities analytics center at BCS Global Markets, believes that prospects for increased production are favorable due to the rise in oil prices since February, provided that the damage from recent attacks on ports in the Leningrad region was minimal. "An increase in production will help attract additional revenue for both companies and the Ministry of Finance. However, a lot will depend on the uninterrupted shipping of oil at key export ports," notes Sergey Tereshkin.
According to S&P Global Commodities at Sea, in the last week of March, Russia reduced its maritime oil exports from Ust-Luga by 4.5 times to 105,000 b/d, and from Primorsk by one-third to 730,000 b/d. For the month, total shipments decreased by less than 1% compared to February, amounting to 3.46 million b/d.
Source: Kommersant
