OPEC+ output falls 210,000 b/d as Russia makes deeper cut; quota compliance still lagging

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OPEC+ crude production fell 210,000 b/d month on month to 41.04 million b/d in April, the Platts OPEC+ survey by S&P Global Commodity Insights found, as Russia began to implement a deeper output cut amid a string of Ukrainian drone attacks on its refineries.

However, the decrease is unlikely to be enough to allay tensions over compliance, with Russia missing its target, and Iraq and Kazakhstan continuing to produce significantly above their quotas.

OPEC+ production is at its lowest since August, not including Angola, which quit the group in December.

OPEC produced 26.63 million b/d in April, down 30,000 b/d from March volumes. Its non-OPEC allies led by Russia added 14.41 million b/d – down 180,000 b/d on month.

The bulk of the declines came from Russia, which committed to implement a deeper output cut from April, and faced disruptions linked to Ukrainian attacks on its refineries and flooding in some oil producing areas.

Russia lowered production by 130,000 b/d to 9.29 million b/d in April, missing its target of 9.099 million b/d, the survey found.

Still, this is its lowest level since May 2022, shortly after Russia's invasion of Ukraine shocked energy markets.

Russia is the only member of the group that is increasing its voluntary cut from April, having pledged to gradually convert what previously were export cuts into actual production cuts by the end of the second quarter, bringing its quota in line with fellow OPEC+ co-chair Saudi Arabia's.

Saudi Arabia continued to comply with its quota, cutting output by 10,000 b/d to 8.98 million b/d in April, the survey found.

Compliance and quota levels have been a major source of tension within the group in recent months, leading to Angola quitting OPEC in late 2023. Iraq and Kazakhstan have also been forced to submit plans to compensate for over production in early 2024.

Sources said Gabon, which also overproduced by 30,000 b/d according to the survey, has no plans to compensate for exceeding its quota.

The survey showed OPEC+ countries implementing cuts produced 249,000 b/d above quota in April – a compliance rate of 96.97%. This compares with compliance of 97.9% in March. The alliance also produced above target in January and February, with compliance rates of 96.5% and 97.8%, respectively.

Iraq and Kazakhstan continued to produce above quota, despite pledging to compensate for their overproduction in early 2024.

Iraq cut its production by 40,000 b/d to 4.24 million b/d in April, compared with its quota of 4 million b/d, the survey found.

Production in Kazakhstan fell 20,000 b/d to 1.54 million b/d, but remained above its quota of 1.468 million b/d.

The two countries overproduced by almost 1 million b/d in early 2024 and have committed to compensate for this between May and the end of December 2024. These plans may be amended depending on future output and OPEC+ policy decisions.

Nigerian production fell 30,000 b/d in April on the back of lower exports and reduced crude shipments to the Dangote refinery, the survey found, marking the fourth successive monthly drop for Africa's largest producer since a recent peak of 1.53 million b/d in December. Efforts by Nigeria to hike output have been undermined by rampant crude oil theft and underinvestment.

By contrast, quota-exempt Libya saw production rise 30,000 b/d in the month on high exports, taking its light, sweet crude output to the highest level since February 2023, with implications for the East Mediterranean crude market.

June meeting

April production data will be the most recent available to OPEC+ ministers when they meet June 1 to set production levels. Analysts with Commodity Insights expect the group will extend current quotas and voluntary cuts.

Price gains from the aggressive OPEC+ cuts have largely faded in recent weeks, with tepid economic indicators in China, rising US production and stubborn pockets of inflation in key economies weighing on the market. Platts assessed Dated Brent at $83.445/b May 9 on May 8, down from above $93/b in early April. OPEC also remains optimistic that demand for its crude will rise through 2025.

Negotiations could prove tricky though, as the group grapples with an uncertain global economic outlook, as well as potentially thorny talks over future production capacity.

* includes estimated 200,000 b/d production in the semi-autonomous Kurdistan region of Iraq

Source: Platts OPEC+ survey by S&P Global Commodity Insights