OPEC+ announced on Sunday an increase in oil production quotas by 206,000 barrels per day (bpd) for May, marking the second consecutive month of such a hike. The decision comes as the group, which includes Saudi Arabia, Russia, Iraq, UAE, Kuwait, Kazakhstan, Algeria, and Oman, faces heightened market volatility due to ongoing conflicts in the Middle East and attacks on energy infrastructure. OPEC+ emphasized that repairing damaged facilities is 'costly and takes a long time,' and highlighted the importance of safeguarding international maritime routes to ensure uninterrupted energy flows [1][2].
The backdrop to this decision is the closure of the Strait of Hormuz by Iran, which has threatened and attacked oil tankers, effectively halting ship traffic through this critical passage. Prior to the conflict, about 20% of global oil and liquefied natural gas (LNG) supplies passed through the Strait. The closure has resulted in the largest oil supply disruption in history, with nearly 1 billion barrels projected to be lost by the end of the month—comprising up to 600 million barrels of crude oil and 350 million barrels of refined products, according to TD Securities. Rapidan Energy estimates a total net loss of 630 million barrels by the end of June, even after accounting for redirected flows, emergency stockpile releases, and inventory drawdowns [1][2].
Market reactions have been swift, with U.S. crude oil prices surging 2.35% to $114.16 per barrel and Brent rising 1.72% to $110.91 per barrel as of Sunday evening. The price spike follows U.S. President Donald Trump's ultimatum to Iran, demanding the reopening of the Strait of Hormuz by Tuesday or facing attacks on Iranian power plants and bridges. Trump warned that Iran would be 'living in Hell' if it did not comply, and set a deadline of 'Tuesday, 8:00 P.M. Eastern Time!' in a social media post [2].
OPEC+ acknowledged that, despite the production increase, it remains uncertain how oil will reach global markets with the Strait still closed. The group praised members who managed to find alternate export routes, which have helped reduce market volatility. However, the ongoing conflict and infrastructure attacks continue to pose significant challenges to global supply security and price stability [1][2].
Analysts such as Ryan McKay of TD Securities noted that with the conflict expected to last at least into late April, the outlook for oil supply remains 'increasingly grim.' The V8 group within OPEC+ reiterated that any actions undermining energy supply security, including attacks on infrastructure or maritime disruptions, exacerbate market volatility and complicate efforts to manage global prices [1][2].
CONCLUSION
OPEC+'s decision to raise production quotas is overshadowed by the ongoing closure of the Strait of Hormuz and extensive supply disruptions, leading to a sharp rise in oil prices. Despite efforts to boost output and find alternative routes, the market faces significant uncertainty and volatility as geopolitical tensions persist.