OPEC output rebounds as Gulf supplies return

OPEC crude production climbed sharply in July as Gulf producers restored output disrupted by the Iran war and restrictions on tanker movements through the Strait of Hormuz, extending the oil market’s recovery from severe supply losses earlier this year.

Production by the 11-member Organization of the Petroleum Exporting Countries increased by about 1.17 million barrels per day from June to 19.85 million bpd. Iraq recorded the largest monthly increase, followed by Kuwait, while Iran also raised supply despite renewed constraints on its exports during the second half of July. Saudi Arabia’s output slipped slightly.

The figures underline the scale of the recovery since May, when OPEC production fell to its lowest monthly level in at least 26 years. The collapse was more severe than the production declines recorded during the Covid-19 demand shock in 2020, reflecting the extraordinary impact of the conflict and the effective closure of the Strait of Hormuz on Gulf energy exports.

The United Arab Emirates is no longer included in OPEC production totals after leaving the producer organisation on May 1. Its departure has reshaped comparisons with earlier output figures and reduced OPEC’s membership to 11 countries.

Iraq’s rebound was particularly significant because its production had fallen far below its assigned OPEC+ target. Kuwait also brought substantial volumes back online as shipping conditions improved. Iran managed to increase exports during part of July, although the reimposition of a US blockade on Iranian ports around the middle of the month slowed shipments again. Libya increased output as well and has been largely insulated from the shipping constraints affecting Gulf producers.

The July gains followed an already substantial improvement in June. Global oil supply jumped by 4.1 million bpd that month to 98.8 million bpd as tanker traffic through Hormuz resumed and Gulf production began recovering. Gulf output alone increased by about 3.5 million bpd in June, though it remained 11.4 million bpd below pre-war levels.

Despite those gains, production remains well below the levels that OPEC+ members would have supplied under their agreed quotas. Seven members of the wider OPEC+ alliance had approved production increases for July, but continued disruptions prevented producers from delivering all the additional barrels theoretically available under those plans.

The group is continuing its gradual effort to return previously withheld supply to the market. Saudi Arabia, Russia, Iraq, Kuwait, Kazakhstan, Algeria and Oman agreed on August 2 to make a further production adjustment of 188,000 bpd for September. The seven producers are also required to compensate for earlier periods of output above agreed limits, complicating the relationship between headline quota increases and the amount of crude that ultimately reaches the market.

Their next meeting is scheduled for September 6, when producers are expected to reassess market conditions, compliance and the pace at which additional supply can be restored. The decisions come as the producer alliance weighs the need to rebuild lost output against the risk that a full supply recovery could eventually produce another global surplus.

Demand forecasts have also become less supportive. OPEC cut its forecast for global oil demand growth in 2026 to 780,000 bpd in July, its third consecutive downward revision. The group nevertheless expects demand growth to accelerate to about 1.94 million bpd in 2027 if geopolitical tensions ease and economic conditions improve.

Other projections are more cautious. High fuel prices, supply shortages and measures to curb consumption have weakened demand during the conflict. Global oil consumption is projected at about 102.8 million bpd this year, compared with 104 million bpd in 2025, before recovering to around 104.8 million bpd in 2027.