Seven OPEC+ countries have announced another increase in oil production, a move that will be watched by motorists, heating oil users, hauliers and businesses exposed to fuel costs.
The group said Saudi Arabia, Russia, Iraq, Kuwait, Kazakhstan, Algeria and Oman would lift output by 188,000 barrels per day from August. The decision followed a virtual meeting to review global market conditions, according to OPEC+.
For UK consumers, the immediate effect is unlikely to be felt overnight at petrol stations or in household bills. However, crude oil prices are a key part of the wholesale cost of petrol, diesel, heating oil and some wider transport and production costs. When wholesale prices move sharply, the impact can eventually work through to forecourts, delivery charges and some business costs, although taxes, exchange rates, retailer margins and supply contracts also affect what people pay.
The latest rise is the fifth monthly increase announced by the seven countries as they continue to unwind voluntary production cuts introduced in 2023. OPEC+ is made up of members of the Organization of the Petroleum Exporting Countries and allied producers, including Russia and several other oil exporting states.
OPEC+ said the countries had reaffirmed the need for a cautious approach and would retain the ability to increase, pause or reverse the phase out of the voluntary cuts depending on market conditions. The seven countries are due to meet again on 2 August to review the position.
The decision comes after a period of volatility in global energy markets linked to the conflict involving the US, Israel and Iran. Brent crude, the international oil benchmark, briefly rose above $126 a barrel in April, according to the source report, but has since fallen back to levels seen before the war as hopes grew for a more stable situation and improved shipping through the Strait of Hormuz.
The Strait of Hormuz is one of the world’s most important energy shipping routes. Before the conflict, it carried about one fifth of global oil and liquefied natural gas supplies. Disruption there can affect international oil and gas markets because delays or restrictions reduce the amount of fuel reaching buyers and can increase uncertainty over future supply.
Shipping activity has started to recover, but remains well below earlier levels. Vessel tracking platform MarineTraffic recorded 38 confirmed transits through the strait on 2 July, down from 48 the previous day and compared with roughly 130 daily crossings before the war, according to the report.
Brent crude futures for September delivery stood at $72 a barrel at 02:01 GMT on Monday. That was below the settlement price of $72.48 recorded on 27 February, the day before the US and Israel launched strikes on Iran, according to the source material.
The disruption had previously forced producers to reduce output because barrels could not be shipped normally and regional storage capacity became strained. OPEC figures cited in the report showed total OPEC+ production falling to 33.13 million barrels per day in May, down from 42.77 million barrels per day in February.
Market analyst Fabien Yip, of IG in Sydney, told Al Jazeera that the latest production increase was largely a “paper formality” because actual supply had been limited for months by conditions around the Strait of Hormuz. He said that constraint was now easing, contributing to lower prices.
Yip also pointed to more oil moving from Saudi Arabia and Iran since mid-June, as well as softer Chinese demand and higher US and Russian exports. In his assessment, those factors could create a near term oversupply, helping explain why oil futures have retreated to pre-war levels.
For consumers, the practical point is that a production increase can help reduce pressure in the wholesale market, but it does not guarantee an immediate or equal fall in pump prices. Petrol and diesel prices are affected by the cost of crude oil, refining, distribution, retailer pricing, fuel duty and VAT. Changes in the pound’s value against the dollar also matter because oil is traded internationally in dollars.
Businesses may also be affected in different ways. Lower oil prices can ease costs for transport operators, airlines, manufacturers and food distribution firms, but the timing depends on contracts and hedging arrangements. For households, any benefit is usually indirect unless they buy heating oil or are making frequent fuel purchases.
The next OPEC+ review in August will be important for understanding whether producers continue increasing output or decide to pause if prices fall too far or demand weakens. For now, the announcement suggests oil producers see enough room to add supply, while consumers should expect any effect on day to day fuel costs to be gradual rather than immediate.
