03/04/25
Opec+ eight to speed up unwinding cuts from May: Update
Adds details throughout Dubai, 3 April (Argus) — A core group of eight Opec+
crude producers, in a surprise move, today agreed to speed up plans to gradually
unwind 2.2mn b/d of production cuts by increasing their collective output target
for May by 411,000 b/d — three times the rise originally planned. "In view of
the continuing healthy market fundamentals and the positive market outlook… the
eight participating countries will implement a production adjustment of 411,000
b/d, equivalent to three monthly increments, in May 2025," the group said. Front
month Ice Brent futures fell by around $1/bl to $70.50/bl in response to the
news, and slipped further to below $70/bl later before recovering slightly. The
eight countries ꟷ Saudi Arabia, Russia, the UAE, Kuwait, Iraq, Algeria, Oman and
Kazakhstan ꟷ last month decided to proceed with a plan to begin gradually
unwinding the 2.2mn b/d of production cuts from April over 18 months. The
original plan was to see their combined output target rise by 137,000 b/d on a
monthly basis until September 2026. Although it is unclear whether the group
will revert back to 137,000 b/d increments after May, this change should,
theoretically, mean that the eight will return the last of the 2.2mn b/d in July
2026, rather than September. But the volume of oil that actually returns to the
market each month will probably be less than the monthly target increases as all
of the eight countries, bar Algeria, have past overproduction which they have
committed to compensating for over the months ahead. The group said today that
the decision to raise output targets by 411,000 b/d for May, versus 137,000 b/d,
would also "provide an opportunity for the participating countries to accelerate
their compensation". The seven countries with overproduction to compensate for
submitted their updated plans to the Opec secretariat two weeks ago, outlining
how they plan to deliver that compensation. It is unclear whether today's
decision has rendered those plans moot, but it should allow for at least some of
the countries to clear more of that they owe next month. Full implementation of
the compensation cuts has become increasingly important for the group as it
looks to balance market expectations with internal group dynamics. Frustration
has built up among some members of the group towards the likes of Iraq and
Kazakhstan which have regularly flouted their quotas. What is most surprising
about the move is timing, coming the day after US President Donald Trump
announced sweeping new global tariffs on a range of imports. That triggered an
immediate sell-off in oil futures and stock markets over fears of deteriorating
demand in an escalating trade war. But the tariff announcements did not appear
to be at the forefront of Opec+ eight minds, with one delegate expressing
scepticism that the Trump administration's tariffs were here to stay. The impact
is unlikely to be as severe as many fear, they said. Instead, the decision
primarily factored in the pick up in oil demand that typically comes with the
start of the summer in the northern hemisphere. "A big part of this 411,000 b/d
will go to meet that additional demand," one delegate said. Additionally, the
move should also enhance internal group dynamics, given the frustration that had
been building among some in the group prior to last month's decision to start
the unwinding in April, while at the same time getting the thumbs up from the US
president who had already called on Opec and its allies to "bring down the cost
of oil," something it could only achieve by raising output. Trump has said that
he will be visiting Saudi Arabia sometime in May, when the group of eight
countries begins to accelerate the return of those barrels. By Bachar Halabi and
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