Uche Cecil Izuora
The global oil market is keeping a close eye on the Organization of Petroleum Exporting Countries (OPEC), which is unwinding output cuts at a faster rate than originally planned to punish over-producers.
The OPEC+, which includes members like Russia, has vowed to increase output by 411,000 bpd for May, June and July.
In total, OPEC pumped 26.75 million bpd last month, up 150,000 bpd from April’s level. The largest increase came from Saudi Arabia, which boosted output by 130,000 bpd.
Eight OPEC+ members, five of which are members of OPEC, were to raise output by 310,000 bpd.
The five members include Algeria, Iraq, Kuwait, Saudi Arabia, and the UAE. The actual increase by the five was 180,000 bpd.
The OPEC oil output rose in May, although the increase was limited as Iraq pumped below target to compensate for earlier overproduction and Saudi Arabia and the United Arab Emirates made smaller hikes than allowed.
The Organization of the Petroleum Exporting Countries pumped 26.75 million barrels per day last month, up 150,000 bpd from April’s total, the survey showed on Monday, with Saudi Arabia making the largest increase.
The OPEC+, which comprises OPEC and its allies, including Russia, is accelerating its plan to unwind its most recent layer of output cuts.
At the same time, some members are required to make extra cuts to compensate for earlier overproduction, in theory limiting the impact of the hikes.
Under an agreement by eight OPEC+ members covering May output, the five of them that are OPEC members – Algeria, Iraq, Kuwait, Saudi Arabia and the United Arab Emirates – were to raise output by 310,000 bpd before the impact of compensation cuts totalling 165,000 bpd for Iraq, Kuwait and the United Arab Emirates.
According to the survey, the actual increase by the five was 180,000 bpd, as the compensation cuts limited the increase. The biggest hike of 130,000 bpd came from Saudi Arabia, the survey found, although that is still 100,000 bpd less than its quota.
Iraq, which is under pressure to boost compliance with OPEC+ output quotas, curbed output, the survey found, to meet its commitment for compensation cuts in May.
The United Arab Emirates also pumped below its OPEC+ quota in May, the survey found, to reflect the country’s relatively low commitments for compensation cuts, a source with knowledge of the issue said.
There is a wide range of estimates of output in Iraq and the UAE with many outside sources putting the countries’ output higher than the countries themselves.
While the Reuters survey and April data provided by OPEC’s secondary sources show they are pumping close to the quotas, other estimates, such as those of the International Energy Agency, say they are pumping significantly more.
The Reuters survey aims to track supply to the market and is based on flows data from financial group LSEG, information from other companies that track flows such as Kpler, and information provided by sources at oil companies, OPEC and consultants.