EIA Says OPEC+ Has Largely Adhered to Latest Cuts

In its latest short term energy outlook (STEO), the U.S. Energy Information Administration (EIA) highlighted that, based on its estimates, “OPEC+ producers have largely adhered to the latest round of OPEC+ voluntary production cuts”.

The EIA pointed out in the STEO that these are set to expire at the end of June and noted that the production cuts removed approximately 2.2 million barrels per day of supply from the world oil market in the first quarter “and have tightened markets further in 2Q24 as additional voluntary production cuts from OPEC+ have taken effect”.

“Many of the current OPEC+ voluntary production cuts are set to expire beginning in 2H24, but we assume some OPEC+ members will continue to voluntarily limit production to keep global oil supplies balanced and to prevent significant builds in global oil inventories,” the EIA said in the STEO.

“Although we assume some extension of voluntary cuts, we expect a gradual unwinding of the cuts leads to OPEC+ crude oil production increasing by 0.5 million barrels per day from 1H24 to 2H24, before increasing by an additional 0.5 million barrels per day on average in 2025,” it added.

“The OPEC+ cuts are restraining world oil production growth this year, partly offsetting growth from outside of OPEC+. We expect that global production of petroleum and other liquid fuels will increase by 1.0 million barrels per day in 2024, slowing from growth of 1.8 million barrels per day in 2023,” it continued.

“Although OPEC+ liquid fuels production decreases by 0.8 million barrels per day in 2024, production outside of OPEC+ increases by 1.8 million barrels per day, led by growth in the United States, Canada, Brazil, and Guyana,” the EIA went on to state.

OPEC+ petroleum and other liquid fuels production is projected to average 42.94 million barrels per day in 2024 and 43.38 million barrels per day in 2025, the EIA’s May STEO shows. The EIA highlighted in the STEO that OPEC+ in this context relates to OPEC members subject to OPEC+ agreements, plus Azerbaijan, Bahrain, Brunei, Kazakhstan, Malaysia, Mexico, Oman, Russia, South Sudan, and Sudan.

The EIA pointed out in the STEO that Iran, Libya, and Venezuela are not subject to the OPEC+ agreements. Production in this context includes crude oil, lease condensate, natural gas plant liquids, other liquids, refinery processing gain, and other unaccounted-for liquids, the EIA STEO shows.

OPEC+ production averaged 43.77 million barrels per day in 2023, according to the latest EIA STEO.

Total world petroleum and other liquid fuels production is projected in the report to average 102.76 million barrels in 2024 and 104.65 million barrels in 2025.

The U.S. comprises 37.50 million barrels per day of the 2024 total and 38.12 million barrels per day of the 2025 total, and non-OPEC+, excluding the U.S., comprises 22.32 million barrels per day of this year’s total and 23.16 million barrels per day of 2025’s total, the report forecasts. Total world production came in at 101.79 million barrels per day in 2023, according to the STEO.

According to OPEC’s website, the next OPEC and non-OPEC ministerial meeting will be held on June 1 in Vienna, Austria. The next meeting of the joint ministerial monitoring committee (JMMC) is scheduled to take place on the same day, the site shows.

In a report sent to Rigzone earlier this month, analysts at J.P. Morgan said they now expect the OPEC alliance will likely keep production targets unchanged when ministers meet on June 1.

The J.P. Morgan analysts also stated in the report that their fundamental view on oil has not changed and highlighted that they have been arguing that OPEC should “unwind some (400,000 to 500,000 barrels per day) of the voluntary supply reductions in 2024 for strategic rather than fundamental reasons”.

In a separate report sent to Rigzone earlier in May, analysts at Standard Chartered Bank said their balances indicate that OPEC has scope to increase output by over one million barrel per day in Q3 without increasing inventories.

In another report sent to Rigzone this month, Bjarne Schieldrop, the Chief Commodities Analyst at Skandinaviska Enskilda Banken AB (SEB), said SEB’s view is that the group will adjust production as needed to gain the oil price it wants, “which typically is $85 per barrel or higher”.

On April 3, a statement posted on the OPEC site said the JMMC “reviewed the crude oil production data for the months of January and February and noted the high conformity for participating OPEC and non-OPEC countries of the Declaration of Cooperation”.

“Participating countries with outstanding overproduced volumes for the months of January, February, and March 2024 will submit their detailed compensation plans to the OPEC Secretariat by 30 April 2024,” it added.

“The Committee will continue to closely assess market conditions and noted the willingness of the DoC countries to address market developments and their readiness to take additional measures at any time building on the strong cohesion between OPEC and participating non-OPEC oil-producing countries,” the statement went on to note.

Source: rigzone.com