OPEC+ Members Push for Accelerated Oil Output Hikes as Dispute Over Compliance Worsens

Several OPEC+ members are planning to suggest the group accelerates oil output hikes in June for a second consecutive month, according to three sources familiar with OPEC+ talks. This move comes amidst a worsening dispute between member countries over compliance with production quotas.

The proposal is likely to be discussed at an upcoming meeting of eight OPEC+ countries on May 5, where the group will decide on the June output plan. The sources noted that some countries want to increase output by a similar volume to the May increase, which saw a 411,000 barrels per day oil production hike.

The recent decision by OPEC+ to increase output in May has led to a sharp decline in oil prices, which hit a four-year low in April due to various factors such as the US-China trade war and an unexpected increase in production. Without specifying how many countries are behind this proposal, the sources emphasized that some members want to follow a similar path to the May increase.

The Organization of the Petroleum Exporting Countries (OPEC) and Saudi Arabia have not commented on these developments yet. However, it is worth noting that oil prices were initially up in early trade on Wednesday but later turned negative, with global benchmark Brent crude trading down over 2% to less than $66 a barrel.

Saudi Arabia had pushed for the speedier output increase in May after Kazakhstan and Iraq exceeded their production quotas, OPEC+ sources revealed. This decision was made following a meeting of senior OPEC+ ministers on April 5, where it was emphasized that compliance with production quotas needed to improve.

However, Kazakhstan's energy minister stated that the country would prioritize its national interests over those of OPEC+ when deciding on output levels. The Kazakh energy minister explained that Kazakhstan is unable to curtail the output of independent oil majors on its territory and will not shut down its own oilfields as this would damage future production.

The decision by Kazakhstan highlights concerns that OPEC+ may implement another accelerated three-month unwind in May, which could continue through July and the summer. This view was echoed by Amrita Sen, co-founder of Energy Aspects, who stated that "Kazakhstan's statement cements our view that OPEC+ may implement another accelerated three-month unwind again in the May meeting and it may continue again in July and through the summer."

Oversupply Continues as Kazakh Oil Output Remains Above Quota

Despite efforts to curb output, Kazakhstan's oil production fell by only 3% from the March average in the first two weeks of April but remained above the OPEC+ quota that had been pledged. This indicates that the country is still exceeding its production target.

Iraq, the largest overproducer among OPEC+ countries, has announced plans to curb output. However, data from industry monitor Kpler shows that Iraq's exports increased in April compared to the previous month, indicating that it may be struggling to meet its production targets.

Not all OPEC+ countries support the accelerated output increases proposed by some members. Russia, for instance, prefers to stick to the earlier approved slower monthly output hikes of 135,000 barrels per day per month (bpd) to avoid a sharp decline in oil prices.

The OPEC+ production increases have been influenced by US President Donald Trump's call on OPEC to lower oil prices and his renewed "maximum pressure" policy towards Iran. The May and potential June hikes are part of a plan by Russia, Saudi Arabia, the United Arab Emirates, Kuwait, Iraq, Algeria, Kazakhstan, and Oman to gradually unwind their most recent output cut of 2.2 million bpd.

OPEC+ also has 3.65 million bpd of other output cuts in place until the end of next year to support the market. These developments have significant implications for global oil markets and prices, which will be closely watched by analysts and investors in the coming months.

Conclusion

The OPEC+ dispute over compliance with production quotas continues to worsen as some members push for accelerated oil output hikes in June. This move is likely to be discussed at an upcoming meeting of eight OPEC+ countries on May 5, where the group will decide on the June output plan.

While some countries support this proposal, others prefer a slower pace of output increases to avoid a sharp decline in oil prices. The recent decision by OPEC+ to increase output in May has led to a significant drop in oil prices, which hit a four-year low in April due to various factors such as the US-China trade war and an unexpected increase in production.

The outcome of this meeting will have far-reaching implications for global oil markets and prices. As the dispute over compliance with production quotas continues to worsen, it remains to be seen whether OPEC+ can implement another accelerated three-month unwind in May, which could continue through July and the summer.