OPEC+ Agrees to Raise Oil Output by 206,000 Barrels Per Day When Strait of Hormuz Reopens

OPEC+ is a group of 23 major oil-producing countries that includes the original 13 members of the Organisation of the Petroleum Exporting Countries (OPEC) plus 10 other large producers led by Russia. Together they account for about 40 per cent of world oil production and more than 60 per cent of global oil exports. The group meets regularly to decide how much oil each member should produce. They set monthly production quotas (limits) for every country. When they cut quotas, global supply falls and prices rise. When they increase quotas, supply rises and prices usually fall. This system helps them influence international crude oil prices and protect their revenues.

Production quotas are the maximum amount of oil each OPEC+ member is allowed to produce every day. The group decides these quotas collectively at meetings. In the current situation, OPEC+ has kept the May increase very small (only 206,000 barrels per day) because most members cannot actually pump more oil. Russia is hit by Western sanctions and damaged infrastructure, while others have reached their maximum capacity. The increase is therefore mostly “on paper” and will not immediately add much new oil to the market.

The Strait of Hormuz is a narrow sea passage between Iran and Oman that connects the Persian Gulf to the Arabian Sea. Almost one-fifth of the world’s oil and a large share of liquefied natural gas normally pass through this strait every day. The ongoing war has led Iran to restrict shipping, effectively shutting the strait for most tankers linked to the US and its allies. This has created the biggest disruption in global oil supply ever seen. Even a small blockage here immediately pushes up prices worldwide because alternative routes are much longer and more expensive.

In earlier oil shocks, supply fell because of wars or sanctions in one country. This time, the closure of the Strait of Hormuz has blocked the main export route for several major producers at the same time. OPEC+ sources say the disruption is so severe that even if they wanted to produce more oil, they cannot get it to buyers. This has sent crude prices to nearly $120 per barrel — a four-year high — and is affecting transport fuel, cooking gas and overall inflation in many countries.

India is the world’s third-largest importer of crude oil. Nearly 85 per cent of its oil comes from abroad, and a large part of these imports normally travels through the Strait of Hormuz. When prices rise sharply or supply is disrupted, petrol, diesel and cooking gas become more expensive inside India. Higher fuel costs increase transport and power prices, raise inflation and slow down economic growth. The government is therefore watching the situation closely, building buffer stocks and looking for oil from other countries like Russia and the USA to reduce dependence on the Gulf route.

OPEC+ is trying to keep the market stable by allowing a small quota increase. Some Gulf countries like Iraq are arranging limited tanker movements through the strait with special permission. Major importers are speeding up purchases from alternative sources and increasing domestic production where possible. The situation also highlights the need for long-term measures such as building more strategic petroleum reserves, developing renewable energy faster and improving energy efficiency.