Key members of the OPEC+ oil cartel announced a greater-than-expected increase to production quotas on Sunday following US and Israeli strikes on Iran that triggered retaliation by Tehran across the Middle East.
The eight-strong V8 (Voluntary Eight) group in the alliance, which includes key oil producers Saudi Arabia and Russia -- as well as several Gulf states bearing the brunt of Tehran’s missile strikes -- said they had agreed a ‘production adjustment’ of 206,000 barrels per day (bpd).
‘This adjustment will be implemented in April,’ they said in a statement.
The text did not explicitly mention the outbreak of the Iran conflict, instead citing ‘a steady global economic outlook and current healthy market fundamentals’ as their reasons for the increase.
Before the weekend’s meeting, experts had forecast a more modest increase of 137,000 barrels per day.
But Jorge Leon, an analyst at Rystad Energy, warned the agreed increase was potentially not large enough to prevent the Iran conflict causing a spike in oil prices when trading opens on Monday.
Leon pointed to the possibility that Iran could target the Strait of Hormuz, a key waterway through which around nearly a quarter of the world’s seaborne oil supplies, in retaliation.
Iran’s Revolutionary Guards have contacted ships to announce the strait was closed. On Sunday, Iranian state TV said an oil tanker in the strait was struck while attempting to ‘illegally’ pass through and was sinking, showing footage of a burning tanker at sea.
‘If oil cannot move through Hormuz, an extra 206,000 barrels per day does very little to ease the market,’ Leon said, arguing that ‘logistics and transit risk matter more than production targets right now’.
The OPEC+ move ‘is unlikely to calm markets’, he said.
‘Prices will respond to developments in the Gulf and the status of shipping flows, not to a relatively small increase in output.’
Besides Russia and Saudi Arabia, the V8 group within OPEC+ includes Kuwait, Oman, Iraq and the United Arab Emirates, all of which were targeted by Iranian attacks for a second day on Sunday.
Algeria and Kazakhstan are also part of the group.
Earlier, Saudi Arabia, Russia and six other key members of the OPEC+ alliance held a virtual meeting by the eight members of the Organisation of the Petroleum Exporting Countries and allied nations (OPEC+) known as the ‘Voluntary Eight’ (V8) comes a day after the US and Israel launched an ongoing wave of strikes on Iran.
Last year, the V8 group — comprising Saudi Arabia, Russia, Iraq, the United Arab Emirates, Kuwait, Kazakhstan, Algeria and Oman — boosted production by around 2.9 million barrels per day (bpd) in total before announcing a three-month pause in output hikes.
But now the picture has changed dramatically.
Even before the conflict erupted on Saturday, the market had already priced in a growing geopolitical risk premium over months of US military build-up in the region.
Brent, the global benchmark for crude oil, jumped more than three per cent on Friday to trade over $73 per barrel, up from $61 at the beginning of the year.
Several other developments have squeezed oil supply since early January, said UBS analyst Giovanni Staunovo.
They include ‘cold weather in the US across January (that) resulted in temporarily production shut-ins’, ‘disruptions in Russia’ linked to drone attacks, as well as in Kazakhstan, where ‘a power outage disrupted production from the Tengiz oil field’, he added.
That’s why, even before Saturday’s strikes, the market was anticipating a quota increase of 1,37,000 barrels per day.
‘These relatively high prices are a good incentive for OPEC+ to resume its production increases’ from April, Kpler analyst Homayoun Falakshahi told AFP.
Before the weekend, Falakshahi said a US strike on Iran would not necessarily alter the OPEC+ decision, as the group might prefer to wait and assess the impact on flows before adding more oil to the market than previously planned.
In the short term, the US attack will likely trigger ‘a massive surge in prices’ with what follows depending on how far the conflict escalates, Falakshahi said.
The conflict could certainly severely disrupt global oil supplies and send barrel prices soaring to a level not seen in years.
Iran is a significant oil producer, but the principal risk remains a prolonged blockade of the Straits of Hormuz, through which around 20 million barrels of crude pass each day — around 20 per cent of global production.
And there are virtually no alternatives for crude transport.
Only Saudi Arabia and the UAE have pipeline networks, capable of carrying a maximum of 2.6 million barrels per day, that allow them to bypass the Straits of Hormuz, according to the US Energy Information Administration.
‘That said, even if strikes remain limited, we think Brent crude oil prices might rise to about $80pb (around their peak during the 12-day war in June 2025), from $73pb yesterday’, wrote William Jackson, chief emerging markets economist at Capital Economics.
But prices would rise much more if the conflict is a prolonged one, particularly if the Strait of Hormuz is blocked for an extended period.
‘That could cause oil prices to jump, perhaps to around $100pb,’ said Jackson.
Even if OPEC+ agrees on an output increase of 1,37,000 barrels per day on Sunday, the impact on oil prices will be limited, especially since the hike would only translate into an actual increase of 80,000 to 90,000 barrels, according to Kpler estimates.
‘Spare capacity is much smaller than some perceive, and primarily in the hands of Saudi Arabia,’ Staunovo told AFP, adding that Russian production had been ‘on a declining trend over the last two months’.
Boosting production would nevertheless allow OPEC+ members to regain market share in the face of competition from other key players such as the United States, Canada, Brazil, and Guyana.
‘OPEC+ would prefer prices of $80-90, but around $70 per barrel is the ideal price level for this strategy’ because it is ‘not enough to encourage further investment by US producers but acceptable for OPEC+,’ Falakshahi said.
