Capital Futures: OPEC+ production increase combined with restored strait navigation, keeping oil prices under pressure at low levels

The Organization of the Petroleum Exporting Countries and its allies (OPEC+) reached an agreement on Sunday (July 5) to further raise production targets by 188,000 barrels per day starting in August. This is an additional increment on top of the production increases already implemented in June and July. However, it should be noted that the prior production increases largely remained on paper, as the conflict between the US and Iran caused the Strait of Hormuz to be temporarily obstructed for oil tankers serving major oil-producing countries, limiting the actual production capacity of countries such as Saudi Arabia, Kuwait, and Iraq. As passage through the strait gradually recovers, the likelihood of this production increase taking real effect is higher, and its marginal impact on global supply will be even more pronounced.

Meanwhile, oil transportation through the Strait of Hormuz continues to recover. According to monitoring data, Iran maintains approvals for approximately 100 to 110 compliant oil tankers per day. While this is still below the pre-war level of about 150 to 170 tankers, there has been a clear improvement. The US Treasury’s 60-day exemption for Iranian oil continues to remain in effect, and Iranian Very Large Crude Carriers are loading approximately 8 to 10 million barrels of crude oil to pass through the strait toward the Asian market.

Regarding US-Iran negotiations, according to Al Arabiya, talks between the two sides on a permanent ceasefire are expected to resume in Pakistan on July 11. This agenda will address three more difficult issues: the nuclear program, economic sanctions on Iran, and the freezing of assets of the Islamic Revolutionary Guard Corps. At present, the recommendation is to mainly wait and see. (Chuangchuang Futures)