Singapore March 10 2024: Crude production by OPEC and its allies was flat in February, the latest Platts survey by S&P Global Commodity Insights found, but compliance issues remain acute, with Iraq and Kazakhstan continuing to pump well above their quotas.
The 22-country OPEC+ alliance produced 41.21 million b/d in February, comprising 26.58 million b/d from OPEC’s 12 members and 14.63 million b/d from its 10 Russia-led partners.
February was the second month of the group’s latest voluntary production cuts, which were supposed to take approximately 700,000 b/d off the market in the first quarter of 2024.
The group has yet to deliver on this pledge. The survey showed that OPEC+ countries implementing cuts produced 175,000 b/d above their combined quotas in February — a compliance rate of 97.8%.
Compliance is likely to be a key issue determining OPEC+ policy and unity in coming months.
The group’s biggest overproducer Iraq produced 4.27 million b/d in February, against a quota of 4.00 million b/d. Output was flat despite the oil ministry saying in mid-February that it was considering compensating for overproduction.
Kazakhstan continues to be the biggest non-OPEC overproducer. It produced 1.56 million b/d in February, against a quota of 1.468 million b/d. Kazakhstan also indicated it would compensate for overproduction in January, but has yet to release further details.
Saudi energy minister Prince Abdulaziz bin Salman was in Kazakhstan to discuss energy markets with President Kassym-Jomart Tokayev on March 7, according to a Kazakh government statement, in a sign that the rest of the group is closely watching quota busters.
Libya posted the most significant growth in February, bringing 120,000 b/d back to market in the first full month that the Sharara oil field — the country’s largest — was back onstream. The 300,000 b/d field was shut for two weeks by protesters in January. Libya is exempt from quotas under the OPEC+ crude production agreement.
Growth in Libya was offset by declines in Mexico and South Sudan, where force majeure was declared on loadings of the country’s key Dar Blend due to a pipeline rupture in neighboring Sudan in mid-February.
The group’s two biggest producers and co-chairs — Saudi Arabia and Russia — complied with their production quotas in February, the survey showed. Saudi Arabia was on target at 8.98 million b/d, while Russia produced 9.43 million b/d — below its quota of 9.449 million b/d.
Future policy
On March 3 OPEC+ extended voluntary cuts until the end of June, as it pins hopes on an uptick in demand in the third quarter. The current quotas had been scheduled to expire at the end of March, but the group continues to battle sluggish prices, global economic uncertainty and growth in non-OPEC oil supply.
OPEC+ is pursuing an aggressive cut strategy in a bid to shore up oil prices. Platts, part of S&P Global Commodity Insights, assessed Dated Brent at $86.41/b on March 6. This was below the March 1 level of $87.50/b, the last assessment before the voluntary cut extension was announced.
All members with voluntary production cuts announced extensions until the end of June, with Russia pledging to transition to a production, rather than a supply cut, which should bring its output on par with Saud Arabia’s by June.
Some analysts are skeptical that this will be enough to support prices. S&P Global Commodity Insights expects OPEC+ members will have to keep their cuts in place through the entire year.
A nine-country Joint Ministerial Monitoring Committee co-chaired by Saudi Arabia and Russia is scheduled to convene April 3 to review market conditions and assess member compliance with their quotas. The committee can also make recommendations for changes to production policy, which then have to be unanimously agreed by the full alliance, which has its next meeting set for June 1 in Vienna.
