OPEC+ Approves Fourth Output Increase, but Hormuz Closure Keeps Oil Near 100 Dollars

Seven core members of OPEC+, the group that joins the Organization of the Petroleum Exporting Countries to allied producers including Russia, agreed on Sunday to raise output targets for a fourth straight month, The Hindu reported. Delegates put the July increase at roughly 188,000 barrels per day, matching June and trimmed from larger steps in April and May after the United Arab Emirates left the organization, according to Business Standard.

The increases are largely symbolic. With the Strait of Hormuz effectively shut to most commercial shipping since late February, Saudi Arabia and other Gulf members cannot deliver in full to customers. Brent traded near 99 dollars a barrel into the weekend, up from about 70 dollars before the war and below a peak near 120 dollars. The International Energy Agency has called the disruption the largest in the history of the oil market.

That a higher quota does not change the price shows the underlying cause. The constraint is physical, not financial. The war between the United States, Israel and Iran reached its 100th day on Sunday, and Al Jazeera reported that the conflict has drawn concern from governments across every region as a global energy crisis deepens.

The Israeli financial daily Globes examined why crude did not climb toward 200 dollars as some forecasters warned, pointing to demand destruction, drawn-down inventories and rerouted flows that have absorbed part of the shock. From a sound-money view, the more durable effect is that energy has become a structural cost pushing prices higher across economies, a supply shock that central banks cannot ease with cheaper credit.