Brent crude oil price falls to pre-conflict level as OPEC+ decides to raise production
New Delhi, July 6: The price of Brent crude oil fell below $72 per barrel today after much improved movement of vessels through the Strait of Hormuz coupled with the decision of OPEC+ to raise production targets for August.
The Brent price has returned to the levels that existed before the conflict started in West Asia on February 28 with the launch of joint airstrikes by the US and Israel on Iran, which retaliated by hitting American assets in countries in the region.
OPEC+ has approved an increase of 188,000 barrels per day from August, extending similar production hikes announced for June and July.
The move signals intention of the grouping of major oil producing countries to gradually restore supply as conditions in the region improve.
The seven producers leading the output policy—Saudi Arabia, Russia, Iraq, Kuwait, Algeria, Kazakhstan and Oman—have increased production targets by nearly 800,000 barrels per day between April and July.
However, much of that increase remained on paper after the U.S.-Israel conflict with Iran disrupted tanker movements through the Strait of Hormuz, limiting exports from key Gulf producers.
According to OPEC data, the group’s production fell to 33.13 million barrels per day in May from 42.77 million barrels per day in February.
Output began recovering in June after exports resumed, but production remains below pre-conflict levels.
Brent crude has declined about 30 per cent during the second quarter after Washington and Tehran reached an interim peace agreement that allowed shipping activity through the Strait of Hormuz to gradually resume.
Prices have now returned to levels seen before the conflict, weighed down by weaker Chinese imports, higher supplies from producers outside the Middle East and record strategic oil reserve releases coordinated by the International Energy Agency.
Alongside the production increases, OPEC+ is also managing internal changes. The United Arab Emirates has exited the alliance, while Iraq has sought higher production quotas.
The seven countries are unwinding a voluntary production cut of 1.65 million barrels per day agreed in 2023. After the August increase, around 379,000 barrels per day of those cuts will remain.
If OPEC+ approves another increase of a similar size at its August 2 meeting, the remaining voluntary cuts will be fully reversed. (BVI)
