Oil Prices May Stay Elevated Despite OPEC+ Output Increase Plans

OPEC+ is preparing to weigh another output increase this Sunday as the world’s most critical oil artery remains effectively shut.

Eight core members of the group are expected to discuss raising production again after agreeing to a 206,000 bpd increase for April. Two OPEC+ sources told Reuters that the group is likely to move forward with another hike on paper, positioning itself to add barrels quickly if the Strait of Hormuz reopens.

More than 20% of global oil flows normally pass through Hormuz. That flow is now constrained by the U.S.-Israeli war with Iran. Saudi Arabia, Iraq, Kuwait, and the UAE have already curtailed output as exports stall. Prices have pushed toward $120 per barrel as a result.

Any increase agreed this weekend would have limited immediate impact. Barrels cannot clear the system if tankers cannot transit the Strait.

One OPEC+ source told Reuters the group needs to react “at least on paper.” Another said the market now requires every available barrel. Both spoke to Reuters on condition of anonymity.

Consultancy Energy Aspects expects a repeat increase of around 206,000 bpd for May. The firm noted that the move is largely academic while Hormuz disruptions persist.

The group’s spare capacity is also uneven. Russia, Kazakhstan, Algeria, and Oman are not directly exposed to the Strait closure but have limited ability to raise output materially. The core Gulf producers retain capacity, but much of it is stranded without export routes.

Saudi Arabia is rerouting crude through its East-West pipeline to Yanbu, with flows nearing 4.6 million bpd. The UAE is pushing volumes through Fujairah, where exports rose to 1.61 million bpd in March, according to Kpler, cited by Reuters.

A pause also remains on the table, with a third source saying that the group could hold production steady given current constraints.

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