OPEC+ agrees another modest output rise as oil prices fall back to pre-war levels

A group of seven OPEC+ producers said on Sunday they would raise output by a combined 188,000 barrels a day next month, a restrained increase that comes as oil trades near its pre-war levels for the first time since the Iran war began.

It is the fifth consecutive monththat members of the alliance have agreed to open the oil taps a little wider.

The decision, taken at a virtual meeting, involves Saudi Arabia, Russia, Iraq, Kuwait, Kazakhstan, Algeria and Oman, and continues the gradual unwinding of voluntary cuts the same countries announced back in 2023.

Saudi Arabia and Russia will carry the largest share, adding 62,000 barrels a day each.

"The countries will continue to monitor and assess market conditions, and in their continuous efforts to support market stability, they reaffirmed the importance of adopting a cautious approach," the group said in a statement.

Oil prices round-trip a war

The backdrop is a striking reversal in the oil market.

Brent crude, the international benchmark, was trading below $72 a barrel as commodities trading opened on Sunday night, roughly where it sat before the US and Israel launched strikes on Iran in late February, and far below the peaks near $120 reached in March at the height of the crisis.

The US benchmark, WTI, was trading even lower at around $68 a barrel.

The slide has been driven by optimism over peace, as Iran agreed under an interim memorandum of understanding to allow ships to pass unimpeded through the Strait of Hormuz while Washington lifted its blockade of Iranian ports. Negotiators, however, are still working towards a final settlement.

Commercial traffic through the strait, which carried around a fifth of the world's oil before the war, has been recovering, though it remains well short of pre-conflict levels, and Tehran warned only last week that tankers straying from its approved routes would face a "forceful response".

Paper barrels and a long recovery

For much of the war, the alliance's monthly increases existed largely on paper.

With the strait effectively closed, Middle Eastern producers were forced to slash actual output as unsold barrels piled up and regional storage ran out of room, leaving real production far below the group's stated quotas.

The gradual reopening is now releasing that backlog onto the market, amplifying the downward pressure on prices well beyond the modest official increments.

However, the rebuild will take time.

S&P Global Energy does not expect Gulf oil production to recover fully until at least the first quarter of 2027, and energy analysts caution that the war's imprint on fuel bills and household costs may linger well beyond a formal peace deal.

The seven producers, who stressed they can pause or reverse the increases if conditions turn, will meet again on 2 August.