OPEC increased its oil production more than expected amid the bombings against Iran

The long-planned meeting was attended by five members of the Organization of the Petroleum Exporting Countries (Saudi Arabia, Iraq, United Arab Emirates, Kuwait, Algeria) and three allies (Russia, Kazakhstan, Oman).

The eight members of the group “they agreed to a production adjustment of 206,000 barrels per day”which “will be applied in April”, according to a statement that does not mention the situation in Iran and is limited to invoking market equilibrium.

The announced increase is greater than 137,000 additional barrels per day that sector experts had anticipated before the conflict in Iran broke out this Saturday.

Yet, However, the price of crude oil is expected to increase considerably in the coming days.

“It is a sign, but not a solution. If oil cannot transit the Strait of Hormuz, an additional 206,000 barrels per day will do little to calm the market.“said Jorge León, analyst at Rystad Energy.

The conflict opened on Saturday with the attack by the United States and Israel on Iran seriously endangers the maritime transit of crude oil through the Strait of Hormuz, through which 20% of the oil consumed worldwide usually passes.

IIran announced to the EU the “de facto” closure of the Strait of Hormuz. And since the first Israeli-American bombings on Saturday, the Islamic republic responded by firing missiles and drones against the Arab monarchies located on the other side of the Gulf, such as Saudi Arabia, Bahrain, the United Arab Emirates and Qatar, which host North American bases.

The price of a barrel of Brent had already integrated the geopolitical risk premium before Saturday, and climbed to more than 72 dollars. On Monday it could continue to rise strongly as soon as the markets open.

And “at this moment logistics and transit risk count more than production objectives,” says Jorge León.

“Alternative infrastructure to the Middle East may be used to avoid passing through the Strait (of Hormuz), but the net impact remains at an effective loss of between 8 and 10 million barrels of crude oil supply“, explained this same analyst in a note published the day before.

The other big unknown is the duration of the conflict.

“We are in the middle of a major military campaign that, in my opinion, will last several days, and perhaps several weeks,” says David Khalfa, co-founder of the Atlantic Middle East Forum (AMEF) research center.

According to Homayoun Falakshahi, analyst at Kpler, black gold prices could exceed $120 a barrel, a level unprecedented in years, in the event of a prolonged war that burns the region and breaks supply chains.

Producing countries could try to increase their production even further in the coming months. OPEC announced that the eight countries will meet again on April 5.

The cartel is also interested in increasing production, to win the market against competition from the United States, Canada, Brazil and Guyana.

The equation is complicated, since according to Jorge León, the only OPEC+ countries that “can really increase their production” are Saudi Arabia, the Emirates, Kuwait and Iraq, precisely the most dependent on the navigability of the Strait of Hormuz.

For his part, Russian production has shown a declining trend since November.

“We believe that Russia is already producing at maximum” and that “it has lost market, particularly in India,” which US President Donald Trump recently pressured to stop buying Russian crude oil, Falakshahi highlights.