OPEC+ decreases production quotas for most members, but Kazakhstan's increases to more than 1.4 million barrels per day in May.
Title: OPEC+ Updates Production Quota Amid Variable Market Conditions
Cover Image: Photo credit: Kazakh Ministry of Energy
PCI (Petroleum Crossroads International) Magazine - The Voice of Oil Politics
OPEC+ has announced a new production quota for May, increasing the total daily output by 1.486 million barrels. The decision was announced following a meeting on April 3, involving eight key members, including Kazakhstan, Saudi Arabia, and Russia.
In another development, after prior voluntary reductions in April and November 2023, these countries will implement a production adjustment of 411,000 barrels per day, primarily as a response to improving market conditions such as declining inventories. However, the situation remains fluid, with the countries reserving the right to pause or reverse the increases depending on evolving market conditions.
Reflecting the broader strategy, the group will work towards restoring 2.2 million barrels per day of cuts gradually, starting from April 1, 2023.
As the group navigates this delicate balancing act, it has faced challenges with compliance, particularly from Kazakhstan and Iraq. These countries have been reportedly overproducing beyond their quotas, contributing to tensions within OPEC+. In response, Saudi Arabia, one of the frontrunners in the group, has pushed for accelerated production increases as a measure to enforce discipline.
If compliance does not improve, OPEC+ may fully unwind the voluntary cuts of 2.2 million barrels per day by the end of October 2023, potentially flooding the market and further pressuring oil prices downward. The OPEC+ countries have emphasized their commitment to the Declaration of Cooperation and plan to monitor market conditions and compliance monthly.
Stay tuned for updates on this dynamic situation as OPEC+ continues to balance market stability, output discipline, and the oil price environment amid fluctuating demand and supply dynamics in the current year.
Additional Insights:
- This production quota raise is part of a larger plan to restore 2.2 million barrels per day of previous cuts since April 2023, reflecting improved market conditions such as declining inventories.
- While Saudi Arabia is pushing for faster quota increases to enforce discipline, compliance issues have mainly been recorded among Kazakhstan and Iraq.
- OPEC+ retains flexibility to adjust production targets based on market conditions and compliance going forward.
- If compliance issues do not improve, the group may unwind the voluntary cuts entirely by the end of October 2023, which could significantly increase supply and pressure oil prices downward.
- Kazakhstan, a member of OPEC+, will resume its oil exporting in 2023 after voluntarily reducing production in April and November.
- The finance ministry of Kazakhstan is closely monitoring the energy sector, particularly the oil-and-gas industry, in light of the recent OPEC+ decisions.
- In the oil industry, OPEC+ countries reaffirmed their commitment to maintaining production quotas, intending to gradually restore 2.2 million barrels per day of cuts in 2023.
- OPEC+ exports are expected to increase significantly in the second half of 2023, potentially impacting global oil-and-gas market finance dynamics if compliance issues persist among certain member countries.
