11/04/25
Opec+ overproducers cast doubt on compensation pledges
Opec+ overproducers cast doubt on compensation pledges
Output is set to rise in the coming months, with Kazakhstan and Iraq unlikely to
live up to commitments to rein in production, writes Aydin Calik London, 11
April (Argus) — The Opec+ alliance's planned production increases in April and
May should, in theory, be offset by pledges to compensate for past
overproduction, particularly by Kazakhstan and Iraq. But there are few signs
that either country will significantly reduce output in the coming weeks. If
anything, Kazakhstan has signalled that production will continue at or near
record levels of around 1.8mn b/d , putting it some 300,000 b/d above its Opec+
target. Opec+ members subject to targets cut output by 90,000 b/d to 33.93mn b/d
in March, according to Argus estimates, but this was still 80,000 b/d above the
group's collective crude production target of 33.85mn b/d. The decision by a
core group of eight Opec+ members to accelerate the return of 2.2mn b/d of
production cuts is a key reason for the recent slide in oil prices, alongside US
tariff announcements. But Opec+ has stressed that its implied output increase of
137,000 b/d for April and another 411,000 b/d in May should be cancelled out by
compensation-related cuts of 249,000 b/d for April and 309,000 b/d in May. In
reality, this is unlikely to happen — the group's output is set to rise.
Kazakhstan is the main reason why Opec+ has exceeded its target over the past
two months. Kazakh production has surged following a major output increase at
the Chevron-led Tengiz field in January — part of the field's future growth
project (FGP). Tengiz production rose to a record 901,000 b/d in March, compared
with previous levels of 600,000-660,000 b/d. The increase came several months
earlier than anticipated, Kazakh officials say, and they have subsequently asked
international oil companies that operate Tengiz and the Kashagan oil field to
reduce output. But the answer has so far been negative. "Unfortunately, we have
not yet agreed with them to the reduction, because for them it is a very
challenging action, especially Chevron, [which] spent $50bn on the FGP project.
They told us it's not possible for them to reduce [output]," deputy energy
minister Alibek Zhamauov said this week. Kazakhstan will try to reduce
production from smaller fields operated by domestic producers such as
state-controlled Kazmunaigaz, Zhamauov said. But any decrease from these fields
will not be enough to offset the rise from Tengiz. Target practice Iraq's output
dipped below its 4mn b/d target in March at 3.98mn b/d, but this was still well
above the country's effective target of 3.88mn b/d under its compensation plan.
If Iraq's past production record is anything to go by, its output is unlikely to
fall much further in the months ahead. While Kazakhstan and Iraq are unlikely to
see much change in their production, members such as Saudi Arabia and the UAE
are set to drive the alliance's output higher. The biggest increase is expected
from Saudi Arabia, which will see its 8.98mn b/d target rise by 222,000 b/d by
May, offset only marginally by its compensation plans. Riyadh has already
signalled that it is preparing to increase production after state-controlled
Saudi Aramco cut the official formula price of its May-loading crude exports.
The largest cut was for buyers in Asia-Pacific, Saudi Arabia's biggest market.
Formula prices can indicate intentions on output, as producers fine-tune how
affordable their crude is for marginal refiners. The second-largest production
increase is set to come from the UAE, which has long been eager to raise output
. The UAE will see its target rise by 103,000 b/d by May, which will also only
be offset marginally by its compensation plan. Russia is also scheduled to
deliver a significant production increase over the next two months, with its
target rising by 105,000 b/d. But all of this increase will be cancelled out if
the country sticks to its compensation plan. Opec+ crude production mn b/d Mar
Feb* Mar target† ± target Opec 9 21.22 21.36 21.23 -0.01 Non-Opec 9 12.71 12.66
12.62 0.09 Total Opec+ 18 33.93 34.02 33.85 0.08 *revised †includes additional
cuts where applicable Opec wellhead production mn b/d Mar Feb* Mar target† ±
target Saudi Arabia 8.98 8.93 8.98 0.00 Iraq 3.98 4.05 4.00 -0.02 Kuwait 2.42
2.43 2.41 0.01 UAE 2.91 2.93 2.91 -0.00 Algeria 0.92 0.92 0.91 0.01 Nigeria 1.49
1.58 1.50 -0.01 Congo (Brazzaville) 0.26 0.24 0.28 -0.02 Gabon 0.20 0.22 0.17
0.03 Equatorial Guinea 0.06 0.06 0.07 -0.01 Opec 9 21.22 21.36 21.23 -0.01 Iran
3.34 3.38 na na Libya 1.36 1.39 na na Venezuela 0.87 0.84 na na Total Opec 12^
26.79 26.97 na na *revised †includes additional cuts where applicable ^Iran,
Libya and Venezuela are exempt from production targets Non-Opec crude production
mn b/d Mar Feb* Mar target† ± target Russia 8.97 8.96 8.98 -0.01 Oman 0.75 0.75
0.76 -0.01 Azerbaijan 0.47 0.47 0.55 -0.08 Kazakhstan 1.79 1.76 1.47 0.32
Malaysia 0.36 0.36 0.40 -0.04 Bahrain 0.18 0.18 0.20 -0.02 Brunei 0.10 0.09 0.08
0.02 Sudan 0.02 0.02 0.06 -0.04 South Sudan 0.07 0.07 0.12 -0.05 Total non-Opec
12.71 12.66 12.62 0.09 *revised †includes additional cuts where applicable Send
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