OPEC+ and the New Oil Order: Supply Strategy After the Hormuz Shock

OPEC+'s decision-making in 2026 has been shaped by a genuinely unusual set of circumstances: a major supply disruption that would normally push the group toward defending prices by cutting output, arriving at the same time as the group was already in the middle of a multi-year process of gradually unwinding earlier voluntary production cuts. The result has been a hybrid response — continuing to add barrels back to the market on the pre-planned unwind schedule, rather than either accelerating output sharply to fully offset the Hormuz shortfall or reversing course to cut output and let prices run higher.

The mechanics of the group's response involve two overlapping structures. A core group of seven OPEC+ members — Saudi Arabia, Russia, Iraq, Kuwait, Kazakhstan, Algeria, and Oman — has been unwinding a voluntary 1.65 million barrel-per-day cut originally agreed in 2023, at a pace that has itself been adjusted downward over 2026 (from monthly increases of 206,000 barrels per day in April and May to 188,000 barrels per day from June and July), partly to account for the UAE's departure from this specific cut arrangement. Separately, the broader OPEC+ coalition has held a further roughly 3.6 million barrels per day of cuts steady through the remainder of 2026, choosing not to touch this larger tranche of reduced output despite the Hormuz disruption's upward pressure on prices.

This calibrated, incremental approach reflects several competing pressures OPEC+ must balance simultaneously. On one hand, the Hormuz closure has removed a substantial share of global supply from the market — the Strait normally carries around 20 million barrels per day, and its effective closure has already contributed to a measured 0.8 million barrel per day year-on-year decline in global oil consumption through March, with a further 1.5 million barrel per day demand contraction forecast for the second quarter, as high prices and disrupted logistics dampen consumption in the hardest-hit regions. Rushing to fully backfill this gap with a sharp output increase from unaffected producers could, in principle, help cap prices for consumers, but OPEC+ members with spare capacity face their own operational and reputational constraints on how quickly they can safely ramp production.

On the other hand, sharply increasing output while demand is simultaneously falling risks pushing the market from an acute shortage directly into an oversupply once shipping routes normalise or demand destruction runs its course, a scenario that could crash prices and hurt the fiscal positions of oil-dependent OPEC+ member economies, many of which rely heavily on oil revenue to fund government budgets. The group's calibrated 188,000 barrel-per-day monthly increases, held broadly steady rather than accelerated sharply despite the crisis, reflect this balancing act: enough additional supply to signal responsiveness and provide some price relief, without moving so aggressively that OPEC+ loses pricing power once the Hormuz situation eventually resolves.

Price forecasts for the remainder of 2026 diverge sharply depending on how the underlying conflict evolves. In a more optimistic scenario where tensions ease and shipping through the strait gradually normalises, crude prices could ease toward $80 per barrel by year-end and decline further into 2027. In a more severe scenario where the closure persists or intensifies, some analysts have raised the prospect of prices approaching $200 per barrel — a level that would represent an unprecedented shock to global growth, inflation, and energy-importing economies' current accounts, testing OPEC+'s current calibrated strategy well beyond its current assumptions.