OPEC+ Considers Pausing Production Increases from October as Focus Shifts to 2027 Quotas

OPEC+ Poised to Pause Output Hike After September

The OPEC+ alliance is reportedly preparing to halt its monthly production increases from October, once it completes the scheduled unwinding of voluntary cuts agreed in 2023. According to multiple people familiar with internal discussions, the group will first meet on August 2 to confirm a September output rise of 188,000 barrels per day (b/d) — the final tranche in a plan that will have returned 1.65 million b/d to the market by that point. After that, the consensus is tilting toward a three-month pause, keeping total output flat through the end of 2026 while negotiations on a new baseline for 2027 quotas take shape.

The temporary halt would leave in place roughly 2 million b/d of older cuts dating from 2022, which remain a key buffer for managing prices. The thinking inside OPEC+ is that pressing ahead with further increases before the new quota system is locked in could destabilise the market, especially with geopolitical chokepoints — notably the Strait of Hormuz — still not operating normally. A final decision has not been taken, and both the OPEC Secretariat and Russian officials have yet to comment publicly.

Attention is now turning to the complex politics of re-calibrating each member’s “Maximum Sustainable Capacity,” a review that will set the 2027 production baselines. Iraq is already pushing for a higher allocation based on recent capacity additions, while the exit of the United Arab Emirates from OPEC earlier this year has redrawn the group’s internal architecture. Simultaneously, the U.S. and Iran have refrained from direct military exchanges in recent days, but the Strait of Hormuz — which historically carries about 20% of global crude — remains disrupted, and Houthi attacks on Red Sea shipping and Saudi energy infrastructure continue to threaten the Bab el-Mandeb strait.

Inside the Pause: Quota Talks, Geopolitics and Demand Fears

Iraq and UAE Complicate the Quota Picture

A central reason for the pause is the need to finalise new production baselines before any further output adjustments. Iraq, which has consistently argued its actual capacity outstrips its current quota, is expected to lobby hard for a larger allocation. That push could ignite tensions with Saudi Arabia and other core members. The UAE’s departure from OPEC, announced last May, reshuffles the alliance’s bargaining power and removes one of the more ambitious producers from the table, potentially leaving other members more room — or less leverage, depending on the view. Analysts at UBS, including Giovanni Staunovo, warn that the pace and shape of the 2027 agreement will be heavily influenced by how these internal dynamics play out alongside external events.

Strait of Hormuz: The Make-or-Break Factor

Even as the U.S. and Iran step back from military confrontation, the Strait of Hormuz — the world’s most important oil transit point — is still far from normal. The cumulative effect of naval tension, insurance costs, and lingering uncertainty is reducing effective supply to global markets. Any sudden normalisation would release a wave of crude that OPEC+ strategists believe could swamp demand, especially if the IEA’s forecast of a pronounced supply surplus in 2027 materialises. The pause, therefore, acts as a hedge: hold production steady while watching whether the waterway reopens, and only then decide on a path for 2027.

IEA Warns of Oversupply If Chokepoints Reopen

The International Energy Agency’s latest outlook — referenced in the OPEC+ discussions — suggests that a gradual return of Hormuz transit could create a significant oversupply as early as next year. With global demand growth already facing headwinds from economic slowdowns in China and Europe, the alliance fears that adding more barrels now would push Brent crude well below levels that support member budgets. By pressing pause, OPEC+ is buying time to see whether demand picks up and to draft a quota system that can absorb the capacity that Iraq, the UAE, and others may bring to the table without collapsing prices.

Key Dates and Triggers for Oil Markets

• Watch the Aug. 2 OPEC+ meeting: The confirmation of September’s 188,000 b/d increase is near-certain, but any joint statement signaling a Q4 pause will be a decisive market signal. A lack of reference to a pause would suggest internal disagreement.
• Track daily tanker data for the Strait of Hormuz: A sustained rise in vessel transits — reflected in shipping insurance premiums and AIS tracking — would indicate that the geopolitical risk premium attached to crude is fading, potentially undermining OPEC+’s strategy and opening the door to lower prices.
• Monitor capacity assessment timelines: OPEC’s review of each member’s Maximum Sustainable Capacity is the bedrock of 2027 quotas. Any leak or official update on Iraq’s claimed capacity or UAE’s role could prefigure a quota fight that moves the market well before the January 2027 deadline.
• Follow IEA monthly reports: The IEA’s supply/demand balance, especially its surplus projections for 2027, remains a key counterweight to OPEC+ planning. A sharply revised surplus estimate would either reinforce the need for the pause or, if demand improves, make the pause look overly cautious — both outcomes matter for oil futures.
• Brent crude futures curve: If the pause is confirmed, backwardation could deepen in near-month contracts, reflecting tighter short-term supply. Conversely, any hint of a breakthrough on Hormuz or a fractious quota meeting could flatten the curve, signaling lower risk to supply. Traders should watch the Dec-2026 vs Dec-2027 spreads.