Key producers within OPEC+ have approved a larger-than-anticipated increase in oil production, even as rising tensions from recent United States and Israel strikes on Iran fuel fears of supply disruptions across the Middle East.
The cartel’s eight-member V8 group — which includes heavyweights Saudi Arabia and Russia — announced on Sunday that it would raise output by 206,000 barrels per day, beginning in April.
“This adjustment will be implemented in April,” the group said, explaining that the decision was based on “a steady global economic outlook and current healthy market fundamentals.”
The increase exceeded analyst expectations of a 137,000 bpd hike, but market watchers warned it may do little to stabilise prices if the conflict worsens.
Analyst Jorge Leon of Rystad Energy cautioned that Iran could retaliate by targeting the Strait of Hormuz, a critical route for nearly a quarter of the world’s seaborne oil supplies.
“If oil cannot move through Hormuz, an extra 206,000 barrels per day does very little to ease the market,” Leon said, stressing that “logistics and transit risk matter more than production targets right now.”
Iranian state television reported that an oil tanker attempting to pass through the Strait was hit and was sinking, amid warnings by Iran’s Revolutionary Guards that the route had been closed. Footage aired showed a tanker ablaze at sea.
Leon added that the OPEC+ decision “is unlikely to calm markets,” noting that “prices will respond to developments in the Gulf and the status of shipping flows, not to a relatively small increase in output.”
Echoing similar concerns, Stephen Innes, managing partner at SPI Asset Management, said insurers were already cancelling cover for vessels heading through the Strait, while shipping companies were treating the route as compromised.
“A full closure for more than a few days is the nightmare scenario,” Innes warned.
He said oil prices could jump from about $72 per barrel before the conflict to between $120 and $150 if Hormuz is blocked. While Saudi Arabia and the UAE have alternative land pipelines, Innes noted these could still leave a shortfall of up to 10 million barrels per day.
“Those are meaningful pressure valves, but they are not a replacement for the full seaborne flow,” he said.
Analysts also warned that extreme price spikes could backfire on the cartel. Homayoun Falakshahi of Kpler said OPEC+ might “prefer prices of $80 to 90, but around $70 per barrel is the ideal price level” to avoid encouraging rival producers like the United States, Canada, and Brazil.
Falakshahi added that Russian output has been declining since November, while Leon noted that only Saudi Arabia, the UAE, and to a lesser extent Kuwait and Iraq, have the capacity to significantly raise production.
With missile threats, rising war-risk insurance, and shipping disruptions in the Gulf, analysts agree that oil markets are now being driven less by production promises — and more by fears over whether crude can safely leave the region at all.
