Opec+ overproducers issue new compensation plans

Seven of the eight Opec+ members that began a gradual unwinding of a combined 2.2mn b/d output cut this month have submitted updated schedules for how they plan to compensate for producing above their respective quotas since the start of 2024.

The schedules, released by the Opec secretariat today, show Iraq, Kazakhstan, Russia, the UAE, Kuwait, Oman and Saudi Arabia are planning to produce around 305,000 b/d below their combined production targets on average from April through June 2026 (see table).

This is to compensate for exceeding their production targets by a cumulative 4.573mn b/d between January 2024 and March 2025, the secretariat said. This figure does not represent a monthly average, but rather the sum of the monthly amount by which the overproducers surpassed their respective output ceilings in this period. It works out to an average monthly overproduction of 305,000 b/d.

Algeria is the only country in the group of eight that did not overproduce in that stretch, and therefore does not have to compensate.

The previous schedule, which was published in the third week of March, envisaged the seven producing around 263,000 b/d below their combined targets on average from March through June 2026. That was to clear 4.203mn b/d of cumulative overproduction between January 2024 and February 2025, or 300,000 b/d on average per month over that period.

This latest schedule factors in the decision by these seven countries, and Algeria, earlier this month to speed up the return of a 2.2mn b/d cut by lifting the group's overall production target in May by 411,000 b/d ꟷ three times more than it had originally planned.

If implemented fully these compensation cuts should at least largely offset much of the production increases that would be allowed by the Opec+ group of eight's planned unwind through to the second half of 2026. At most, the compensation cuts would more than offset the planned increases for some months, including for this month.

But with serial over-producers Iraq and Kazakhstan responsible for delivering the biggest chunk of these compensatory cuts through to the middle of next year, there is no guarantee of full implementation.

By Nader Itayim