Mint Explainer | Why Opec+'s output increase in May won't cool global oil prices

NEW DELHI: Oil prices have been on the boil since the war between the US, Israel and Iran broke out on 28 February. To ease supply concerns and prices of over $100 per barrel, the Organization of Petroleum Exporting Countries (OPEC) and its allies including Russia, together known as OPEC+, agreed to increase production in May.

Mint looks at how the proposed rise in output might impact global prices.With the blockade of the Strait of Hormuz, about 20% of global energy supplies from Gulf countries has been almost fully cut off for over a month. Supplies from Russia and Iran are flowing due to temporary waivers on sanctions imposed by the US.

Global demand for oil from the two countries and alternative sources in Africa and South America has surged. In a report on 12 March, the International Energy Agency (IEA) said that with supplies declining from around 20 million barrels before the war to a trickle currently, and storage filling up, Gulf countries have cut total oil production by at least 10 million bpd.

It projected that global oil supply is projected to plunge by 8 million bpd in March.The OPEC+ countries—Saudi Arabia, Russia, Iraq, the UAE, Kuwait, Kazakhstan, Algeria and Oman—decided on Sunday to increase production by 206,000 barrels a day in May to support oil market stability.The Joint Ministerial Monitoring Committee of OPEC+, at its meeting on Sunday, highlighted the importance of safeguarding international maritime routes to ensure the uninterrupted flow of energy. It expressed concern over attacks on energy infrastructure, noting that restoring damaged assets is costly and takes time, affecting overall supply availability.In March, the IEA agreed to make 400 million barrels of oil from its emergency reserves