Grant Smith, Julian Lee and Bill Lehane, Bloomberg News

LONDON
EnergiesNet.com 04 03 2024

OPEC’s crude oil production remained steady last month while some members stalled on delivering agreed cutbacks.

The Organization of Petroleum Exporting Countries pumped 26.86 million barrels of crude a day in March, according to a Bloomberg survey, barely changed from the previous month. 

Three months into a new accord aimed at shoring up oil prices by reducing output, several OPEC nations like Saudi Arabia and Kuwait are abiding by the deal, but some others are not. Iraq, the United Arab Emirates and Gabon are collectively pumping several hundred thousand barrels a day above their agreed quotas. 

Nonetheless, the combined effort by OPEC and its partners has helped to buoy crude prices, which topped $89 a barrel in London on Tuesday, their highest level this year. The supply cuts — along with surprisingly robust fuel demand in the US and elsewhere — are keeping world markets tight despite a flood of new output from the Americas. 

Oil’s recovery could pose a nuisance for central banks like the Federal Reserve as they seek to pivot to looser monetary policy, and for consumers around the world still smarting from years of rampant inflation. For the Saudis and their allies though, the rally bolsters vital government revenues.

OPEC and its partners, a 22-nation bloc known as OPEC+, are due to review world oil markets at an online gathering on Wednesday, and officials predict they’ll keep the overall strategy unchanged. Still, there could be tough words for some of the countries that are exceeding their assigned limits.  

Iraq showed a slight improvement in compliance last month, trimming output by 30,000 barrels a day to 4.17 million a day, according to the survey.

Yet the country continues to pump roughly 170,000 barrels a day more than its quota, despite several promises by its oil minister, Hayyan Abdul Ghani, to fully adhere and even make extra cutbacks in compensation for overproduction. Baghdad has often chafed at limits set by OPEC+ as its seeks petroleum revenues to rebuild a shattered economy.

The UAE produced 3.13 million barrels a day in March, or about 218,000 more than its limit, while Gabon increased output last month to 230,000 barrels a day, around 60,000 a day above its ceiling. Abu Dhabi pointed to the OPEC+ caps in a report outlining lowered economic growth projections. 

Key members in the wider OPEC+ coalition are also showing a mixed performance. 

Russia has belatedly implemented crude oil production cuts promised a year ago, but its delivery of export reductions agreed for this year is less clear. While shipments of fuels like diesel have fallen, this may be linked to Ukrainian drone strikes on Russian refineries. Meanwhile, exports of crude are rebounding. 

OPEC+ will meet in early June to decide whether to prolong the supply curbs for the rest of the year. 

While some forecasters such as JPMorgan Chase & Co. believe the alliance can relax the cuts and restore production, others are less confident. Estimates from the International Energy Agency in Paris suggest that, if OPEC+ eases the cutbacks, world markets will tip back into surplus. 

Bloomberg’s survey is based on ship-tracking data, information from officials and estimates from consultants, including Kpler Ltd., Rapidan Energy Group and Rystad Energy A/S.

–With assistance from Anthony Di Paola, John Deane, Andrew Reierson, Lucia Kassai and Verity Ratcliffe.

bloomberg.com 04 02 2024