OPEC's total oil production increased by 1.17 million barrels per day (bpd) in July compared to June, as Gulf producers restored some of the output that had been shut in for three months following the closure of the Strait of Hormuz, a chokepoint that normally carries roughly a fifth of global oil consumption.

Production across the 11-member group rose to 19.85 million bpd in July, marking the second consecutive month of increases, according to a Reuters survey based on ship-tracking data and information from sources at OPEC, oil companies, and consultants.

In May, when major Gulf producers sharply curtailed output, OPEC's production fell to its lowest level since 2000 — even below what the group produced at the height of the Covid-19 lockdowns, when demand collapsed amid global restrictions. However, the May figure excludes the United Arab Emirates, which exited OPEC effective May 1, removing one of the cartel's largest producers and reducing the group's collective spare capacity.

The July output increase was primarily driven by Iraq and Kuwait, with Iraq recording the largest monthly production gain among members. Iran also raised both output and supply to markets during July, benefiting from a two-week period in which no U.S. blockade was in place to restrict Iranian oil exports.

Kuwait's crude production was estimated at 1.971 million bpd in July, up from 1.65 million bpd in June and just 580,000 bpd in May.

Despite the recovery, production volumes remained well below OPEC+ quota targets, as ongoing shipping constraints in the Middle East continued to prevent a full restoration of output. The persistent gap between announced quotas and what members can physically bring to market underscores how the Strait of Hormuz disruption has made OPEC+ policy decisions largely theoretical for Gulf producers.

At its latest meeting earlier this month, OPEC+ announced it would raise production targets by an additional 188,000 bpd beginning in September, according to an official OPEC statement. With this decision, the group effectively unwinds the final portion of the production cuts agreed upon in 2023, which were designed to balance the market in a manner favorable to member states.

OPEC+ has been unwinding these cuts since spring, though most of the adjustments have existed only on paper, as the Strait of Hormuz blockade has prevented the normal flow of crude oil from Gulf producers. In theory, OPEC+ should produce 1.65 million bpd more in September than it did in 2023. In practice, achieving this target would prove challenging, as security conditions in the Persian Gulf remain largely unchanged from March, although some tanker traffic has been reported.

By Tsvetana Paraskova for Oilprice.com