OPEC+ Greenlights 188,000 bpd Output Hike; India Poised for Cheaper Oil

The Organisation of the Petroleum Exporting Countries and its allies (OPEC+) have approved an increase of 188,000 barrels per day (bpd) in crude production for August, marking the fifth such monthly hike since the conflict in West Asia began in February. The decision, taken at a virtual meeting of seven major producers led by Saudi Arabia and Russia, is expected to increase global oil supply and put downward pressure on prices.

Analysts said the move will ease the burden on oil-importing nations like India, which meets nearly 90% of its crude requirement through imports. Global benchmark Brent crude has slipped to around $72 a barrel, close to its pre-war level, while the Indian crude basket has softened to $67–68 per barrel. Higher supplies are expected to reduce inflationary pressures and allow India to build up its strategic petroleum reserves.

Domestically, state-run oil marketing companies have been incurring losses due to high crude costs. They lost more than Rs 75,000 crore in the first quarter of this financial year. However, if crude prices hold at current levels, these companies may break even on petrol and diesel within the next seven to ten days. They continue to lose about Rs 500 on every cylinder of cooking gas sold.

The production increase is part of a gradual unwinding of output cuts totalling 2.2 million bpd announced by eight OPEC+ countries in November 2023. Those cuts were in addition to reductions of 1.66 million bpd agreed in May 2023 to support prices. Since the war started on February 28, OPEC+ has added 940,000 bpd to production quotas, equivalent to nearly 1% of global oil demand.

However, the actual impact has been limited because the US-Israel attack on Iran disrupted shipments through the Strait of Hormuz, a crucial maritime route for crude from Saudi Arabia, Kuwait, and Iraq. Before the conflict, more than a fifth of the world’s oil supply passed through the strait. The availability of Iranian crude, for which payments can be made in dollars, along with oil from Venezuela, has partly eased the pressure on importers.

“The group of seven kept unwinding their production cuts as widely expected,” said UBS analyst Giovanni Staunovo. “The near-term focus will remain on how many tankers will manage to cross the Strait of Hormuz and how quickly demand and Chinese crude imports recover.”

The meeting came amid internal tensions within OPEC+. Iraq, a founding member, had threatened to leave the group if it was not granted a higher production limit. The United Arab Emirates exited OPEC+ in May to align its output with its production capacity. The latest increase is part of efforts to balance market stability with the geopolitical disruptions affecting supply routes.