OPEC finalises compensation plan for overproduction

Iraq and Kazakhstan, two members of the OPEC+ coalition have agreed on a compensation plan for their overproduction during the first three months of this year.

PHOTO: Flag of OPEC. Getty Images

According to the Organization of the Petroleum Exporting Countries (OPEC), its members Iraq and Kazakhstan's overproduced volumes of crude oil between January and March of this year stood at 602,000 b/d and 389,000 b/d, respectively.

As part of the compensation plan, Iraq plans to produce 50,000 b/d below its allocated production quota between May and September. It will produce 100,000 b/d below quota in October and September, and 152,000 b/d in December.

Earlier this year, Iraq agreed to voluntary production cuts that capped its oil production at 4 million b/d.

Kazakhstan has also pledged to compensate for its overproduction. It will produce 18,000 b/d below its production quota in May and 131,000 b/d below quota in August. It will implement a cut of 299,000 b/d in October and 40,000 b/d in November. The country agreed to a production quota of 1.5 million b/d.

The group’s effort to compensate for overproduction through rigorous compliance comes at a time when the Brent's price is already trading below the $85/bbl mark.

This news is expected to put some upward pressure on Brent futures as “both countries have set out plans to fully make up for these volumes by the end of the year,” two analysts from ING Bank said.

“Moreover, any overproduction that may arise in the month of April 2024 for these countries [Iraq and Kazakhstan] will be accommodated in the respective compensation plans over the remaining months in 2024,” OPEC said.

By Aparupa Mazumder 

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