OPEC+ announces July output increase of 648,000 bpd, Brent prices rally

Quantum Commodity Intelligence - The OPEC+ producer group said Thursday it would increase output quotas by 648,000 bpd in July and August, compared to a rise of 432,000 bpd in June, as the producer group made a small concession to falling Russian exports.

However, with few producers able to meet targets, the increase is likely to make little difference to combined output, with only Saudi Arabia, UAE and possibly Kuwait in a position to meet the new targets.

Overall, OPEC+ produced 2.6 million bpd below its target in April, according to an internal report based on data from secondary sources, with overall compliance rising to a record 220% from 157% the previous month.

The larger July increase was flagged before the meetings by the Wall Street Journal and Financial Times, following off-the-record briefings by OPEC+ delegates, which caused a two-day price slide of more than $6/b.

However, with the additional 220,000/b of quotas shared among the bloc rather than targeted at those with available spare capacity, Brent futures rallied over $3/b after the OPEC+ JMMC technical team made the recommendation ahead of the meeting.

Traders noted that Saudi Arabia and Russia have both been allocated quotas of 10.833 million bpd in July, compared to 10.663 million bpd in June.

UAE's quota increased to 3.127 million bpd from 3.075 million bpd in July, while Kuwait was up to 2.768 million bpd versus 2.724 million bpd in June.

OPEC+ had been restoring output at a rate of 400-432,000 bpd since August 2021, following the record cut in the second quarter of 2020 as the Covid-19 pandemic slashed demand.

The increase for July was viewed as a diplomatic concession from Saudi Arabia, following a thawing in relations with the US last month.

Several visits in recent weeks from a high-level US delegation, including Brett McGurk, White House coordinator for Middle East policy, and Amos Hochstein, White House energy envoy, have helped improve the relationship.

President Biden is also likely to visit Saudi Arabia later this month as part of an international trip for NATO and G7 meetings.