Consistent with BTU Analytics’ forecast, OPEC+ again delayed its decision to bring back 2.2 MMb/d of voluntary production cuts to April 2025. The group initially planned to roll back these cuts in October 2024. The delay comes amid concerns around global demand growth and, on the supply side, adherence to OPEC+ production quotas. Overproducing has become such an issue that in July 2024, OPEC publicly published for the first time compensation plans for three countries in particular: Iraq, Kazakhstan, and Russia. However, how much these countries are overproducing, and how compliant OPEC+ is with its quota as a whole, depends on the data source being looked at.
Production data reported by OPEC shows a different view of compliance compared to the IEA, and, thus, the Call on OPEC. In OPEC’s Monthly Oil Market Report (MOMR), production data is published using both Secondary Sources and Direct Communication. Secondary Sources include data from various third-party data sources, including the EIA. As of March 2022, OPEC no longer uses IEA data as one of its Secondary Sources. Conversely, methodology for Direct Communication volumes vary across member nations as each nation sets its own approach to self-reporting.
According to the latest MOMR released in December, OPEC production volumes for January–October 2024 reported via Direct Communication show overcompliance with the 2024 quota by an average of 285 Mb/d, while Secondary Sources have overproduction averaging 206 Mb/d for the same timeframe. The IEA data, however, has OPEC overproduction averaging 339 Mb/d year-to-date.
The Overproducers
Iraq, Kazakhstan, and Russia are consistently mentioned by OPEC as the countries most out of compliance, with average overproduction totaling 621 Mb/d from January–October 2024, according to IEA data. Using OPEC’s Secondary Sources, overproduction from these countries averaged 440 Mb/d from January–October 2024, though Iraq was the largest overproducer, averaging 255 Mb/d over its quota.
The lack of compliance by these countries using either dataset is consistent with these three countries receiving formalized compensation plans. The other country that is producing well above its quota, using IEA data, is the UAE, with overproduction averaging 323 Mb/d in 2024. However, OPEC’s Secondary Sources and Direct Communication have overproduction by the UAE averaging 30 Mb/d and 17 Mb/d, respectively, thus making it appear to OPEC that the UAE is producing fairly in line with its quota. It is also worth noting the UAE is allowed to increase production by 300 Mb/d starting in April 2025, as it reached an agreement on increasing its base production at the 38th OPEC and non-OPEC Ministerial Meeting.
How OPEC+ Stacks Up
IEA data shows OPEC+ production averaged 494 Mb/d over its quota from January to October 2024. However, according to OPEC’s Secondary Sources, overproduction averaged only 3 Mb/d year-to-date, which is much closer in line with the group’s targeted goals.
Keeping these discrepancies in mind, the production dataset used in calculating global balances could lead to different conclusions in terms of what production is required to keep the global market balanced, especially when several (quite varied) pictures of OPEC+ production are being circulated. With OPEC Secondary Sources showing OPEC+ production at nearly 500 Mb/d less than the IEA, OPEC likely sees a tighter market than market participants using IEA data, potentially explaining the plans to start unwinding the 2.2 MMb/d in voluntary production cuts in April 2025. Be sure to check back in with BTU Analytics in 2025 as we continue to cover OPEC behavior and what it means for the new year.
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