FXTRADING Financial Focus (Asia-Pacific 07/07)OPEC+ Continues Supply Recovery

OPEC+ has decided to press ahead with its plan to restore crude oil production. During its latest virtual meeting on Sunday, the group's seven core producers confirmed that they will raise their combined production quota by another 188,000 barrels per day starting in August, following similar increases in June and July. As shipping through the Strait of Hormuz gradually returns to normal, production increases that had previously been delayed by geopolitical disruptions are now beginning to materialize, with global crude oil supply expected to increase further.

Over the past several months, although OPEC+ repeatedly announced higher production targets, exports from major producers such as Saudi Arabia, Iraq, and Kuwait were constrained by disruptions to shipping through the Strait of Hormuz, leaving most of the planned output increases only on paper. With shipping conditions now improving, more crude oil is expected to reach international markets, accelerating the pace of supply recovery.

Data showed that OPEC+ production fell to 33.13 million barrels per day in May, well below pre-conflict levels. Output began to recover in June as exports gradually resumed, although production has yet to fully return to previous levels. At the same time, increased exports from non-Middle Eastern producers, together with coordinated releases from strategic petroleum reserves by the International Energy Agency, have also helped ease global supply tightness.

As supply pressures have eased, international oil prices have cooled noticeably. Brent crude has retreated to around USD 72 per barrel, broadly returning to its pre-conflict level. Market attention has gradually shifted from geopolitical risks toward supply and demand fundamentals. Going forward, the recovery of shipping through the Strait of Hormuz, the pace of global demand recovery, and import trends across major economies will continue to shape the outlook for the oil market.

In addition to the production increases, OPEC+ is also facing growing internal coordination challenges. The United Arab Emirates has left the alliance and is no longer subject to the group's production quota system, while Iraq continues to seek a higher production quota in order to expand its exports. As member countries pursue increasingly different interests, the alliance is likely to face greater challenges in coordinating production policies going forward.

Under the current plan, the seven core members have already restored around 800,000 barrels per day of production since April, while approximately 379,000 barrels per day of the voluntary production cuts introduced in 2023 remain unrecovered. If another production increase of the same size is approved at the meeting in early August, this round of voluntary production cuts will be almost completely unwound, allowing global crude oil supply to move further toward normal levels.

From FXTRADING's perspective, OPEC+'s continued production increases indicate that the global crude oil market is gradually moving beyond the supply disruptions caused by geopolitical conflicts and returning to a market driven primarily by fundamentals. Going forward, investors will pay closer attention to the actual implementation of production increases, changes in global inventories, and the pace of demand recovery, as these factors are expected to become the key drivers of balance in the international energy market.