OPEC+ set to raise output targets after UAE exit, despite Hormuz disruption

(Bloomberg) – OPEC+ is likely to agree another symbolic production increase for June, in the group’s first move since the surprise departure of the United Arab Emirates, three delegates said. 

Seven major nations led by Saudi Arabia and Russia will probably add 188,000 bpd to their output target during a video conference on Sunday, two of the delegates said, even though they’d be unable to implement it with the Strait of Hormuz blocked. The OPEC+ delegates asked not to be identified as any deliberations are private.

The group is continuing the process—at least on paper—of restoring output halted several years ago, which had been in progress before the outbreak of war. OPEC+ is adjusting to the surprise loss of long-time member the UAE, which quit the organization on Tuesday after years of frustration over constraints on its output.

The Iran war has effectively closed Hormuz, forcing exporters around the Persian Gulf to shutter vast swathes of output. Raising quotas now could be useful later, when the conflict ends and countries revive production. Reuters first reported the potential output increase by OPEC+ on Wednesday.

Russian Deputy Prime Minister Alexander Novak said the UAE’s decision to leave OPEC won’t lead to an imminent price war since the Iran conflict has throttled producers’ ability to unleash supplies, according to a report by Interfax. With Emirati officials already signaling plans to boost production, there’s concern that the country’s exit could eventually set the stage for a rush for market share.