OPEC+ Agrees To September Oil Hike In Full Rollback Of Voluntary Cuts

Throughout its history, the Organization of the Petroleum Exporting Countries (OPEC) has been a bit of a thorn in the side to the United States. The organization and its partners, like Russia, have essentially dominated the oil market for years. They have been able to shorten production, expand it, and essentially do as they please to impact American markets as they can.

But even OPEC+ had to faces some voluntary production cuts in 2023, slashing output by about 5.3 million barrels per day, or about five percent of global demand. That was in efforts to stabilize prices amid volatile demand and rising non-OPEC supply. The organization has also been in chaos mode, as the United Arab Emirates announced its departure in May.

So, in an effort of self-preservation, OPEC+ has agreed to a September oil hike, increasing the quota by 188,000 barrels per day. That completes the rollback of the aforementioned voluntary cuts. But, while it is a nice gesture, it ultimately means little at the moment.

Energy analyst David Blackmon says the whole organization is beholden to the Strait of Hormuz, which right now, is dicey to say the least.

"They just have no means of meeting whatever quotas are set...and it is just another signal that OPEC has lost any sort of control over crude oil markets," he says.

While there was expected to be output increases paused later this year, there could be even more production increases by years end. Not only have they lost control over the markets, but they are also barely functioning as an organization themselves.

Now in the United States, there are no real short-term effects, especially as the conflict with Iran continues. But in the long term, there could be some big positives for American consumers.

"It would mean a much more robust supply on the global market, and that will help temper prices when markets return to a more normal status where oil flows are concerned," says Blackmon.

The markets have been far from normal since the conflict began due to a variety of factors. The Strait of Hormuz has been the huge clog in the drain and continues to be as peace talks progress once again.

Returning to those typical markets, and accessing the long-term benefits of this cut, all come down to getting the Strait flowing once again.

"They only thing that can return things to a more normal stature is the end of th econflict, one way or another," Blackmon says.

He adds that until we end this, these elevated prices are here to stay.

OPEC meanwhile has their next meeting September 6th.