ENB Pub Note: Excellent article from Tsvetana Paraskova for Oilprice.com. This brings up a talking point that I have been tracking. When the U.S. or other countries need extra money, they just print it, and when countries in OPEC+ that do not have access to print additional revenue, they just drill for oil and gas. This has been a long-term issue for Saudi Arabia, and I aplaud them for their efforts to try and enforce quotas. The U.S. can not handle oil lower than $61 for a long time, and Saudi Arabia still needs oil over the $75 range. The world is still short $4 trillion in investment into replacing the existing well decline curves. So I am still a perma bull as I believe the trade wars will be solved sooner rather than later, and we will see a right-sizing of trade.
- OPEC+ members have submitted plans to compensate for a total of 4.57 million bpd in overproduction.
- The compensation plans detail monthly offsets, primarily between May and October 2025.
- OPEC+ has struggled with member overproduction, impacting the effectiveness of production cuts.
The latest compensation plans envisage the biggest monthly compensations to be made between May and October 2025, with lower total monthly compensations left for next year.
In theory, this means that the OPEC+ producers will produce lower volumes than planned this year and offset the production 411,000 bpd hike from May 2025.
In practice, OPEC+ hasn’t achieved full conformity with the production cuts as producers such as Iraq, Kazakhstan, and Russia have continuously failed to stick to their quotas.
Just ahead of the production increase beginning in April, the OPEC+ group boosted its oil production to an eight-month high in March, according to the Platts OPEC+ Survey from S&P Global Commodity Insights.
The producers in OPEC+ who have quotas have busted their overall output ceiling by a massive 319,000 bpd, according to the Platts survey.
The continued problems with compliance and higher OPEC+ production in March come as the group begins easing the cuts in April and is set to further hike production in May by three times the expected amount.
Earlier this month, OPEC said that the decision to go ahead with a large production boost in May could also “provide an opportunity for the participating countries to accelerate their compensation.”
By Tsvetana Paraskova for Oilprice.com
Energy News Beat