OPEC’s crude oil production has dropped sharply to its lowest level in nearly four decades, driven by escalating tensions between the United States and Iran and the recent exit of the United Arab Emirates from the organization. According to a Bloomberg survey, output from the 11 remaining OPEC members fell by 1.22 million barrels per day in May, reaching 16.33 million barrels per day — a figure not seen since at least 1989.
Iran was the hardest hit, with its production plummeting by 710,000 barrels per day to a five-year low of approximately 2.34 million barrels per day. This decline followed the US blockade imposed on Iranian ports in mid-April, which has severely restricted Iran’s ability to export oil. The US Central Command reported redirecting 127 commercial vessels to enforce this maritime blockade, intensifying the pressure on Iranian exports.
Other Gulf producers also faced significant output cuts amid regional instability. Kuwait’s oil production dropped by 310,000 barrels per day to just 490,000 barrels per day — less than one-fifth of its pre-war levels. Saudi Arabia, the group’s largest producer, reduced output by around 240,000 barrels per day to about 6.57 million barrels per day. These cuts were largely due to disruptions around the Strait of Hormuz, a vital shipping route that has been effectively shut down amid conflict involving US-Israeli alliances and Iran.
Despite these sharp declines in actual production, OPEC and its allies have continued to increase their official output quotas on paper. Recent meetings indicated plans for modest quota hikes of about 188,000 barrels per day in July, with additional increases anticipated in August and September. These steps are part of a broader effort to reverse previous production cuts introduced several years ago but have yet to translate into increased physical supply.
The UAE’s departure from OPEC last month after six decades has added another layer of complexity. Unlike other members facing production declines, the UAE boosted its output by approximately 300,000 barrels per day in May, reaching around 2.44 million barrels per day. Abu Dhabi’s state oil company Adnoc has reportedly managed to transport some crude shipments through the Strait of Hormuz despite ongoing regional disruptions.
Market reactions have been mixed amid these developments. Oil prices experienced a decline on June 5 following speculation about a potential peace agreement between the US and Iran. Brent crude futures fell by over 2% to below $93 a barrel while West Texas Intermediate dropped about 3% to near $90 a barrel. However, market analysts note that geopolitical tensions continue to pose significant risks for supply stability and could support higher prices if conflicts escalate further.
Looking ahead, industry observers will closely monitor any changes in US-Iran relations and OPEC’s production policies. The continuation or easing of the maritime blockade and any diplomatic breakthroughs could dramatically reshape oil supply dynamics and global market conditions in the coming months.
