Seven OPEC+ countries continued their strategy of abandoning voluntary production restrictions and agreed to increase the production limit in June by 188 thousand barrels per day. This corresponds to the May figure, adjusted for the UAE leaving the coalition. A conservative approach may indicate a desire to add calm to the oil market. In addition, so far the production volumes of a number of OPEC+ members, including Saudi Arabia and Russia, are significantly below quotas due to logistics restrictions.
OPEC+ countries that voluntarily assumed additional restrictions on oil production (Russia, Saudi Arabia, Iraq, Kazakhstan, Kuwait, Algeria and Oman) increased the permitted level of oil production in June by 188 thousand barrels per day (b/d). This is in line with the plan to phase out additional obligations, effective from April 2025. Quotas are adjusted monthly. The next meeting will take place on June 7.
The approved level of quota increases actually corresponds to the May indicator (an increase of 206 thousand b/d), but without taking into account the volumes of the UAE, which announced its withdrawal from OPEC and OPEC+ on April 28 (see. “Kommersant” dated April 29). The meeting on May 3 took place without representatives from Abu Dhabi.
For the meeting participants, the UAE’s withdrawal from the alliance came as a surprise, so even if they wanted to change something in their decision, they would not have time to do it in such a short time, Kommersant’s sources in the market note. In addition, in their opinion, the stability of the rate of production increase will add calm to the oil market, which is already in a state of shock.
Russia will be able to increase oil production next month compared to May by 62 thousand b/d, to 9.76 million b/d, Saudi Arabia – by 62 thousand b/d, to 10.29 million b/d.
Kuwait is allowed to increase production by 16 thousand b/d, up to 2.63 million b/d, Kazakhstan – by 10 thousand b/d, up to 1.6 million b/d, Algeria – by 6 thousand b/d, up to 989 thousand b/d, Oman – by 5 thousand b/d, up to 826 thousand b/d, Iraq – by 26 thousand. b/d, up to 4.35 million b/d.
These data do not take into account the compensation schedule for previously admitted overproduction for Kazakhstan and Oman. In May, these countries must replace 879 thousand and 16 thousand barrels of oil per day, that is, their actual production will be below the permitted level.
Director of the analytical department of Sinara Bank Kirill Tachennikov believes that the conservative approach to increasing production is due to the fact that countries, firstly, want to confirm their commitment to discipline within the organization, despite the UAE’s withdrawal, and secondly, most key participants cannot even fully use the existing quotas until cargo turnover through the Strait of Hormuz is fully restored. Therefore, even the established volume will probably not be selected immediately, the expert believes. Thus, Saudi Arabia’s oil production, according to OPEC, in March amounted to only about 7.8 million bpd. Production in Russia remains under pressure due to incidents at export facilities and sanctions.
Partner at Kasatkin Consulting Dmitry Kasatkin also says that countries’ ability to increase production is very limited at the moment. According to him, the production of the Persian Gulf countries is reduced due to restrictions in the Strait of Hormuz, and countries outside it are already doing their best to compensate for the shortfall in the market. “So these statements are more likely signals to the market about the unity of members after the UAE’s exit, as well as their readiness to stabilize prices,” says the analyst.
Igor Yushkov, an expert at the Financial University under the Government of the Russian Federation, believes that given the blocked Strait of Hormuz, OPEC+ decisions will not affect the market in any way, since the physical balance of raw materials on a global scale will not change.
In his opinion, OPEC+ countries will continue to adhere to the strategy of increasing production taking into account the seasonal factor (that is, faster in the summer) in anticipation of the time when shipping restrictions in the strait are lifted. These steps will help prepare the market for a significant increase in supply in the future, the expert notes.
