OPEC+ oil producers have three layers of output cuts in place after agreeing the first cutback in 2022. This year, eight OPEC+ members have started to raise production and unwind the third and most recent tranche of cuts.
The 22-member OPEC+ will hold an online meeting on Wednesday, which is not expected to change output policy, and eight OPEC+ members are scheduled to gather on Saturday to decide on a production increase for July, sources said.
The eight – Algeria, Iraq, Kazakhstan, Kuwait, Oman, Russia, Saudi Arabia and the United Arab Emirates – at meetings earlier this year have raised their production targets by nearly 1 million barrels per day covering April, May and June production – just over 1% of daily world demand. This leaves them with 1.2 million bpd of the most recent cut still in place.
Below is an explainer on how the latest decisions from the Organization of the Petroleum Exporting Countries and allies, known as OPEC+, work.
CURRENT OUTPUT CUTS
OPEC+ members are cutting output by a total of 5.3 million bpd or about 5% of global demand.
This includes three tranches:
1. 2.00 million bpd by all OPEC+ members, which was extended last December by a year until the end of 2026 from the end of 2025 previously.
2. 1.65 million bpd of voluntary cuts by eight members (Algeria, Iraq, Kazakhstan, Kuwait, Oman, Russia, Saudi Arabia and the United Arab Emirates) was extended last December by a year until the end of 2026 from the end of 2025.
3. 2.20 million bpd of voluntary cuts by eight members (Algeria, Iraq, Kazakhstan, Kuwait, Oman, Russia, Saudi Arabia and the United Arab Emirates) was extended last December by three months to the end of March 2025 from the end of December 2024.
Since their December meeting, the group of eight has made a series of decisions to accelerate the timeline for releasing those barrels back to the market, previously scheduled to take place by end of September 2026:
– March 3: they agreed to proceed with a planned hike of 138,000 bpd in April.
– April 3: They surprised the market by announcing that they were accelerating their production rise schedule, releasing an additional 411,000 bpd in May, instead of the planned 135,000 bpd.
– May 3: they announced a further increase of 411,000 bpd in June, therefore raising production by nearly 1 million bpd in April, May and June and leaving the total production cuts at just under 5 million bpd.
Reuters reported that the group of eight was considering another 411,000 bpd increase for July and unwinding the remainder of this cut by the end of October.
4. Under the agreement last December, the United Arab Emirates was granted a higher production quota, allowing it to gradually boost output by 300,000 bpd over a period starting April 2025 – three months later than earlier planned – until the end of September 2026.
Source: Reuters (Editing by Nina Chestney and Barbara Lewis)