Opec+ overproducers outline new compensation plans

Seven Opec+ members have submitted plans to the Opec secretariat detailing how they intend to compensate for producing above their crude production targets since January 2024.

The plans show that Iraq, Kazakhstan, Russia, the UAE, Kuwait, Oman and Saudi Arabia will reduce their combined output by an average of 263,000 b/d over the 15 months to June next year (see table).

This is to compensate for exceeding their production targets by a cumulative 4.203mn b/d between January 2024 and February 2025. This figure does not represent a monthly average, but rather the sum of the monthly volumes by which the group's overproducers have surpassed their respective output ceilings. It works out to an average monthly overproduction of 300,000 b/d in the same period.

If implemented fully, these compensation related cuts would partly offset a plan by these seven members plus Algeria to return 2.2mn b/d of voluntary production cuts starting in April over 18 months. In fact, the scheduled output increases for April and May would be entirely wiped out.

But there is no guarantee the compensation related cuts will be delivered. Some members, Iraq and Kazakhstan in particular, have largely failed to deliver on past commitments to reduce output to below their production targets.

By Aydin Calik