The Organization of the Petroleum Exporting Countries and allies are expected to go ahead with their plan of increasing oil production for a second consecutive month in May, according to a Reuters report.
The move by the cartel comes after it had agreed to stick with the plan of unwinding some of its voluntary output cuts of 2.2 million barrels per day, and raising output from next month.
The news development also comes amid steady oil prices and plans to push some members of OPEC to reduce production to compensate for overproduced volumes in the previous months.
Oil output to rise from April
The group known as OPEC+, which is responsible for over 40% of the world’s oil production, includes OPEC and allied producers led by Russia. Saudi Arabia is the de facto leader of the group.
The eight OPEC+ countries that voluntarily reduced their oil production levels had reached a consensus in early March to gradually increase output and reverse these cuts starting from April, as previously outlined in their agreement.
This decision includes a production increase specifically granted to the United Arab Emirates.
As a result of these combined increases, the total oil production from OPEC+ countries is projected to rise by 138,000 barrels per day in the upcoming month.
According to the Reuters report, OPEC+ plans to increase output by a further 135,000 barrels per day in May.
This would be the second monthly increase as part of a plan to gradually reverse some of the millions of barrels per day of production cuts that the group has had in place since 2022.
Compensation plans
The group is pressuring producers who have exceeded their targets to reduce output and operate below target for a period of time.
Simultaneously, OPEC is also trying to raise output targets for members who have failed to meet their previous targets.
The group announced on March 20 that seven members will implement additional monthly production cuts from this month until June 2026.
These cuts, which are intended to offset previous overproduction, are theoretically larger than the monthly production increases.
One OPEC+ delegate stated that the compensation cuts should allow the group to proceed with its plan for monthly hikes.
The report also stated that two other delegates anticipated the hike schedule to continue as planned from May.
Oil prices and overall output cuts
Brent crude, the international benchmark, was trading above $72 per barrel on Monday.
This follows a drop to almost $68 on March 5, its lowest point since December 2021, two days after OPEC+ decided to continue with April’s planned output increase.
The group has cut output by around 5.7% of global supply, or 5.85 million barrels per day, since 2022. They have agreed on a series of steps to support the market.
OPEC’s Joint Ministerial Monitoring Committee, which can recommend production policy changes to the larger group, will convene on April 5.
Earlier this month, Russian Deputy Prime Minister Alexander Novak indicated that OPEC and its allies might reconsider their decision to increase oil output after April.
This potential reversal would be contingent upon the emergence of imbalances within the oil market.
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