OPEC+ quota violators step up efforts to conform to production limits

(Bloomberg) – OPEC+ nations that have persistently exceeded oil production quotas provided updated plans to make additional cutbacks in compensation.

The reductions pledged by countries including Kazakhstan, Iraq and Russia should — in theory — offset the group’s plans to revive halted output through to the end of next year, according to a statement on OPEC’s website. They have also frontloaded their latest reduction plans. 

However, that trio have mostly failed to make compensation curbs since the current round was announced a year ago, and — until recent months — generally continued to flout their output quotas. 

Indeed, OPEC+ has had little success with the compensation mechanism since it was introduced five years ago. The cartel’s failure to ensure compliance has weighed on crude prices, which are trading near $72 a barrel in London as faltering Chinese demand and plentiful American supply threaten to create a supply surplus. 

In recent months, data from the Organization of Petroleum Exporting Countries have shown Iraq and Russia stepping up efforts to conform.

Kazakhstan, however, significantly exceeded its target last month as the country expands its giant Tengiz oil field in partnership with Chevron Corp. Some OPEC+ delegates said that Astana’s persistent delinquency influenced the group’s decision this month to begin easing supply quotas from April.

See also: OPEC+ oil production surges as Kazakhstan ignores, exceeds quota

In an effort to improve compliance, the country asked international oil partners including Shell Plc and Exxon Mobil Corp. to cut output, and said last week it had reached an agreement. Nonetheless, exports of Caspian CPC Blend crude are expected to remain near record levels next month. 

The scale of overproduction could be even larger than that captured by OPEC’s statistics. 

While the organization’s figures — derived from several independent secondary sources — show Iraq and Russia getting closer to their quotas this year, data from the International Energy Agency in Paris indicates that both continue to exceed them by several hundred thousand barrels per day. The IEA’s numbers also show significant excess output from the United Arab Emirates.