OPEC+ committee emphasizes need for quota, compensation plan compliance

The committee overseeing the OPEC+ crude production agreement has noted "the critical importance" of producers sticking to quotas and compensation plans, according to an OPEC statement following a meeting April 5.

The group did not indicate any changes to current OPEC+ policy, despite collapsing oil prices in recent days.

Eight OPEC+ producers that are implementing 2.2 million b/d of voluntary production cuts agreed April 3 to raise quotas more than planned in May, in a move that surprised market watchers.

This has exacerbated the impact of US tariff announcements and retaliation by its trade partners, helping to push the Platts Dated Brent crude price down to $67.895/b on April 4 -- the lowest level since August 2021.

OPEC said April 5 that the Joint Ministerial Monitoring Committee, which is co-chaired by Saudi Arabia and Russia, reviewed crude production data for January and February and will continue to monitor compliance with the deal.

Compliance has been a major source of tension within the group and is seen by analysts and delegates as one of the reasons why voluntary cutters announced a surprise decision to increase quotas by a combined 411,000 b/d in May at a meeting April 3.

OPEC referred to continuing healthy market fundamentals and the positive market outlook in a statement announcing the decision.

Other factors that could have influenced the policy change include expectations of a seasonal demand bump, and the possibility of significant declines in Iranian and Venezuelan production if sanctions pressure increases.

Plans previously released by the OPEC Secretariat include overall compensation cuts of 309,000 b/d, indicating that production levels may only rise by 102,000 b/d in May. The group has agreed to submit revised compensation plans to the secretariat by April 15.

If implemented, compensation cuts could soften the supply impact of the quota increases.

"With financial markets in panic mode, oil prices are likely to stay volatile in the near term," UBS said in a note released April 4.

Possible changes to tariff policy, progress on peace talks in the Middle East, and the potential for US sanctions policy to remove significant volumes of Iranian, Venezuelan, or Russian crude from the market could also determine oil prices in the coming months.

The voluntary production cutters plan to meet again on May 5 to decide output levels for June. The next meeting of the JMMC and a full OPEC+ ministerial meeting is scheduled for May 28. The group can convene extraordinary meetings at any time if market conditions require.