OPEC+ produces 437,000 b/d above quota in first month of compensation cuts

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OPEC+ crude production in July made its biggest jump in almost a year, as Iraq and Kazakhstan raised their output despite committing to deeper cuts, while Russia also remained well over its quota.

The group's overall production was up 160,000 b/d compared with June, totaling 41.03 million b/d, the Platts OPEC+ survey from S&P Global Commodity Insights showed Aug. 8.

Member countries with quotas produced 437,000 b/d above target in July, up from 229,000 b/d in June.

July was the first month of compensation plans introduced by three countries that overproduced in the first half of 2024. Iraq pledged to cut an additional 70,000 b/d in July and Kazakhstan pledged to cut a further 18,000 b/d. Russia's compensation plan does not include additional cuts until October 2024.

The survey found that Iraq produced 4.33 million b/d in July, 400,000 b/d above its quota. This contributed to growth in OPEC production of 130,000 b/d to 26.89 million b/d.

Non-OPEC producers added a further 14.14 million b/d, up 30,000 b/d month on month.

This was driven by Kazakhstan, which increased output by 30,000 b/d. It is now producing 120,000 b/d above quota, taking into account its compensation cut.

Russia is also producing above quota, with output at 9.10 million b/d in July, against a quota of 8.98 million b/d.

The overproducers are part of a group that is implementing a combined 2.2 million b/d of voluntary cuts, currently in place until the end of the third quarter. The group then plans to gradually bring some of those barrels back to market from September if conditions allow. A further 3.6 million b/d of group-wide cuts are in place until the end of 2025.

The rise in output in July came despite the poor performance of the alliance's African contingent, with production in Nigeria, South Sudan, Gabon and Libya falling by a collective 80,000 b/d.

Pressure on overproducers has increased in recent weeks, as recession fears have driven oil prices below $80/b. Platts, part of Commodity Insights, assessed Dated Brent at $79.91/b Aug. 7.

A long-awaited rise in Chinese demand and high production from non-OPEC countries in the Americas -- including the US, Canada, Brazil and Guyana -- have also weakened prices in recent months.

OPEC+ has pledged to stick to its strategy of major production cuts through the third quarter, before gradually bringing barrels back to market. Overproduction and depressed oil prices threaten these plans.

The next meeting of the Joint Ministerial Monitoring Committee overseeing the agreement, which is co-chaired by Saudi Arabia and Russia, is scheduled for Oct. 2. A full ministerial meeting is scheduled for Dec. 1.

The Platts survey measures wellhead production and is compiled using information from oil industry officials, traders and analysts, as well as by reviewing proprietary shipping, satellite and inventory data.