OPEC+ to pause output hikes after September as Iran war clouds supply

OPEC+ will approve a final 188,000 bpd quota increase for September before suspending further production hikes through year-end, as the Iran war disrupts Middle Eastern supply and complicates the group's capacity assessment.

OPEC+ plans to approve a final 188,000 bpd production increase for September at an Aug. 2 online meeting, then suspend further quota hikes through the end of 2025 as the Iran war disrupts supply from key Middle Eastern members, according to delegates familiar with the matter.

"The group is effectively pausing because the war has already taken barrels off the market, making further nominal increases meaningless," said Omar Tariq, an energy analyst covering global oil markets. "The real challenge now is determining how much capacity actually exists after the disruptions."

The September increase completes the return of a 1.65-million-bpd voluntary cut agreed in 2023, adjusted for the UAE's departure from OPEC in May. Saudi Arabia, Russia, Iraq, Kuwait, Algeria, Kazakhstan and Oman will raise their combined September target by about 188,000 bpd. Current production targets would then remain in place from October until new quotas take effect in January 2027, one delegate said, though no final decision has been made. The pause leaves another 2 million bpd of group-wide cuts in place through the end of 2026.

The Iran war has fundamentally altered the supply picture. Iranian forces have attacked oil tankers in the Strait of Hormuz, reducing exports from several Middle Eastern members and cutting deeply into the group's effective spare capacity. Iraq remains constrained by export bottlenecks, Kazakhstan has reduced production after attacks disrupted Black Sea loadings, and Russia is dealing with refinery and terminal outages. Brent crude surged past $100 a barrel during the conflict before falling to $82 after a US-Iran ceasefire, reflecting the extreme uncertainty around supply availability.

The Capacity Question

Deciding what happens to the remaining 2 million bpd of cuts will require OPEC+ to settle a much less pleasant matter: how much each member should be allowed to produce. The group is reviewing the maximum sustainable production capacity of its members, which will be used to set 2027 baselines. Iraq and other producers want higher quotas to reflect investments that have expanded their capacity, but the war has made the counting considerably messier.

Everyone wants credit for barrels they say they can pump, but recent events have reduced the group's ability to verify those claims. OPEC+ has spent months raising targets while actual group output fell — the increases gave members permission to restore supply whenever wells, pipelines, ports and shipping lanes allowed it. Permission was the easy part.

The IEA expects a substantial surplus if oil flows through the Strait of Hormuz recover, but that scenario depends on the durability of the US-Iran ceasefire. If the truce holds, the 2 million bpd of cuts still on the books could become a source of tension within the group as members with restored capacity push to produce more. If the conflict reignites, those cuts will be irrelevant — the market will have lost far more supply than OPEC+ ever voluntarily withheld.

This article is for informational purposes only and does not constitute investment advice.