OPEC+ member countries that produced above quota in the first quarter of 2024 have until April 30 to submit detailed compensation plans, OPEC said April 3 in a statement released following a meeting of the Joint Ministerial Monitoring Committee overseeing the alliance's output.
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Compliance has been a major sticking point in OPEC+ negotiations in the past and analysts expected it to continue to cause friction this year as the alliance looks to stabilize the oil market following significant volatility, wars in Europe and the Middle East and disappointing Chinese demand.
Several major producers including Iraq, the UAE, Kuwait and Kazakhstan produced over quota in February. So far Iraq and Kazakhstan have announced their intentions to compensate for overproduction.
Iraq produced 4.27 million b/d in February compared to a quota of 4 million b/d, according to the Platts OPEC Survey from S&P Global Commodity Insights.
Iraq said March 18 it will cut exports to 3.3 million b/d -- around 134,000 b/d below February levels until the end of June.
They continue to be above this level, however. Exports of Iraqi crude fell by 11,000 b/d on month in March to 3.423 million b/d, according to SOMO monthly data, seen by S&P Global.
Kazakhstan has not yet released a detailed compensation plan. It pumped 92,000 b/d above its quota in February.
The two largest OPEC+ producers Russia and Saudi Arabia both produced within quota in February. Riyadh has done the heavy lifting when it comes to cutting output since last year, with production falling to levels not seen since the coronavirus pandemic.
OPEC+ produced 34.5 million b/d in February -- not including those exempt from targets -- according to the Platts survey, some 170,000 b/d above its current quotas.
OPEC said, however, that the JMMC noted a high level of conformity to cuts in January and February and it will continue to monitor compliance.
Nevertheless, the group faces several quota challenges in the second quarter in addition to compensation plans, despite a recent oil price rally.
Russia has agreed to transition from a voluntary oil supply cut to an oil production cut. This will bring Russian output in line with Saudi Arabia's by June.
OPEC said the JMMC welcomed Russia's Q2 plans.
Meanwhile, a number of smaller producers including Brunei, Gabon and Oman are also pumping above their quotas, and are heavily dependent on oil revenues.
OPEC also previously announced plans to adjust quota baselines based on current capacity as estimated by external sources, which could cause further friction. The group was expected to discuss these new baselines at the next full ministerial meeting scheduled for June 1.
OPEC said the JMMC will continue to closely assess market conditions and its next meeting will also take place June 1. The deal allows for extraordinary meetings of the group, if necessary, an option that it has taken in the past.
Market conditions
The JMMC met after a steady climb in oil prices since the start of the year, partly due to the impact of OPEC+ cuts, as well heightened supply fears from conflict in the Middle East and Europe.
Platts assessed Dated Brent at $89.95/b on April 2, up from $82.28/b on Nov. 29 -- the day before several OPEC+ producers announced voluntary cuts for the first quarter. Platts is part of S&P Global Commodity Insights.
Dated Brent was assessed at $87.495/b on March 1 -- the day before producers with voluntary cuts announced their plans to extend these until the end of the second quarter.
Attacks on Russian refinery infrastructure and shipping in the Middle East have also boosted prices in recent weeks.
However, many analysts, including at S&P Global Commodity Insights, forecast that the group will have to further extend cuts into the second half of the year to support prices.
OPEC+ is battling with growing non-OPEC supply, particularly in the Americas. The gap between US production and output in Saudi Arabia and Russia is expected to further widen throughout 2024.
