OPEC receives compensation plans from seven members

OPEC has received compensation plans from seven member countries for producing crude oil above their designated quotas in the previous months.

PHOTO: OPEC's flag. Getty Images

Seven of the eight OPEC+ members planning to gradually unwind their collective 2.2 million b/d cuts starting next month have agreed to reduce their crude oil output targets over March 2025 to June 2026 to compensate for previous months’ overproduction.

Iraq and Russia have begun cutting production this month, OPEC said. Iraq plans to continue its compensation through June next year, while Russia's target extends until September 2025. The two countries aim to cut production by about 1.95 million b/d and 706,000 b/d, respectively.

The UAE will trim production by 10,000 b/d between May and October, and by 20,000 b/d in November and December this year. The remaining excess production will be offset through June 2026.

The collective monthly compensations will range between 189,000 b/d and 435,000 b/d, according to the Vienna-headquartered group. However, the group’s plan to gradually bring back the ongoing 2.2 million b/d output cut remains unaffected by the monthly compensations.  

“These [compensation] plans could effectively offset the [2.2 million b/d] production hikes, leaving OPEC production steady in coming months,” ANZ Bank’s senior commodity strategist Daniel Hynes remarked.

Meanwhile, oil market analysts remain sceptical about the effectiveness of these compensation plans, citing repeated quota breaches by several OPEC+ members, including Russia and Kazakhstan.

“While the group shares a plan for compensation cuts, it certainly doesn’t mean members will follow it,” two analysts from ING Bank noted. “A handful of members have consistently produced above their target production levels,” they added.

By Aparupa Mazumder

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