OPEC+ Set To Approve Another Oil Output Increase

Oil prices are sliding again, with the United States Oil Fund (USO) at 103.98 dollars, up a modest 0.69 percent on the day but still sitting near the bottom of its 52 week range of 102.42 to 154.08. An RSI reading of 30.13 puts the fund on the edge of oversold territory, a signal that traders are pricing in a supply glut just as OPEC+ prepares to open the taps further.

OPEC+ Adds Another 188,000 Barrels a Day

Sources close to the group say OPEC+ agreed on Sunday to raise output quotas by roughly 188,000 barrels per day starting in August, layering on top of similar increases already made for June and July. Seven core members, Saudi Arabia, Russia, Iraq, Kuwait, Algeria, Kazakhstan and Oman, have lifted their combined quotas by nearly 800,000 barrels per day since April. The catch is that most of that increase has existed only on paper. The war between the United States, Israel and Iran shut the Strait of Hormuz to tanker traffic for weeks, choking exports from Saudi Arabia, Kuwait and Iraq at precisely the moment their quotas were rising.

Output Collapsed, Then Started Clawing Back

OPEC data show group production fell from 42.77 million barrels per day in February to just 33.13 million in May, a drop of nearly 10 million barrels per day tied directly to the Strait closure. June brought a partial recovery, helped by U.S. efforts to get the United Arab Emirates and other members exporting again, but output remains below prewar levels. That gap between quota and actual barrels reaching the market is central to understanding why prices have not spiked further despite the geopolitical disruption.

Why USO Has Round Tripped to Prewar Levels

Brent crude traded near 72 dollars a barrel on Friday, down sharply from peaks above 120 dollars during the worst of the conflict. Several forces converged to erase the war premium: weaker Chinese import demand, rising exports from producers outside the Middle East, and a coordinated release of strategic reserves organized through the International Energy Agency that added meaningful barrels to global supply at a critical moment. A memorandum of understanding aimed at ending the conflict also reassured traders that Middle East flows would normalize, pulling risk premium out of the futures curve even before physical supply fully recovered.

Iraq Wants More, the UAE Already Left

Complicating the group's math, the UAE exited OPEC+ in late April, seeking to produce closer to its actual capacity without quota restraints, while Iraq is now pushing for a higher allocation of its own. The seven remaining producers are unwinding a 1.65 million barrel per day cut originally agreed in 2023, back when the UAE was still part of the pact. Accounting for the UAE's departure from May 1, Reuters calculations put roughly 379,000 barrels per day of that original cut still left to restore as of August. At the current pace of increases, the group would fully unwind the cut by the end of September, a timeline that keeps supply growth on a collision course with still uncertain demand and a Strait of Hormuz that has only partially reopened.