In May, OPEC+ crude production increased to 41.19 million barrels per day (b/d) as Saudi Arabia seized the opportunity to raise output to meet domestic demand. The Platts OPEC+ Survey released by S&P Global Commodity Insights on June 10 indicates that Saudi Arabia boosted its production by 170,000 b/d. Meanwhile, Iraq, facing pressure to control overproduction, reduced its output by 50,000 b/d to 4 million b/d due to lower exports. Kazakhstan, still exceeding its quota significantly, saw a minor decrease in output.
The OPEC+ alliance, consisting of eight producers, had previously signaled a strategy shift in May, opting to increase market share rather than maintaining strict production cuts. These countries—including Saudi Arabia, Russia, Algeria, Oman, Kazakhstan, Iraq, the UAE, and Kuwait—agreed to raise their quotas by 411,000 b/d over a three-month period. However, only Saudi Arabia and the UAE adhered to the new limits, with the UAE increasing production by 30,000 b/d to reach 3.06 million b/d. The total production from Saudi Arabia stood at 9.14 million b/d, marking a notable recovery since its significant production cut in June 2023.
Despite the growth in output, compliance remained an issue, as OPEC+ members collectively underproduced by 28,000 b/d in May. Quota non-compliance has fueled tensions within the organization, with some members committing to making compensation cuts for excess production. Overall, OPEC’s output rose by 160,000 b/d to 27.02 million b/d, while its non-OPEC allies contributed an additional 14.17 million b/d, culminating in the total OPEC+ production increase of 180,000 b/d. As summer demand builds, OPEC has chosen to expedite the unwinding of production cuts, reflecting a shift from price defense to prioritizing market share.
This strategic pivot comes amidst external market pressures and influences, including calls from the U.S. for increased oil supply to moderate prices. However, analysts warn that while seasonal demand may mask the immediate impact of increased OPEC+ output, supply growth could soon outpace demand, potentially leading to lower oil prices by the end of the year. The next meeting of voluntary cutters is set for July 6 to review output levels for August.