In October, the Organization of the Petroleum Exporting Countries and its partners (OPEC+) increased their crude oil production by 30,000 barrels per day (bpd), according to the latest report from S&P Global Commodity Insights. This increase is mainly due to a jump of 420,000 b/d in Libya, offset by a significant reduction from Kazakhstan, as well as more moderate decreases in Iraq and Iran.
The Role of Libya and its Internal Issues
Libya has significantly increased its production following the end on October 3 of an oil blockade driven by political dissension around the leadership of the central bank. However, despite this recovery, Libyan production, due to maintenance on the Sharara oil field, has not returned to its pre-crisis level, reaching 1.15 million b/d. This country, exempt from quotas within the framework of OPEC+ due to its chronic instability since the fall of Muammar Gaddafi in 2011, plays a unique role in the production dynamics of the alliance.
Reduction of Kazakh Production
In Kazakhstan, production fell by 300,000 b/d following a three-week maintenance period at the Kashagan field, one of the largest in the country. Despite this drop, the country's production level remains slightly above its quota of 1.203 million b/d, set as part of a compensation plan established in August. Kazakhstan is thus one of the many OPEC+ producers seeking to adjust their production after observed overruns.
Compliance Challenges for OPEC+
Quota compliance remains a persistent difficulty within OPEC+. In October, OPEC members subject to quotas produced 348,000 b/d above their targets, while non-OPEC partners underproduced by 179,000 b/d. These differences fuel tensions within the group, which must reconcile price stability with the desire to maintain market share.
OPEC+ must juggle weak Chinese demand, rising production in other regions, such as the Americas, as well as market volatility caused by conflicts in the Middle East and Europe.
Volunteers' Position on Production Cuts
On November 3, eight voluntary countries, including Saudi Arabia and Russia, postponed their decision to reduce current cuts by 2.2 million b/d until January 2025, for fear that prices would fall further. These reductions are part of a program of 5.8 million b/d of overall cuts to stabilize the market in the face of economic and geopolitical uncertainties.
Forecasts for OPEC+ and Upcoming Challenges
According to OPEC's latest monthly report, the alliance's crude oil demand is estimated at 42.8 million b/d for 2024 and 43.2 million b/d for 2025, well above levels of current production. This optimistic estimate contrasts with other forecasts and could strengthen OPEC+'s market position if it proves correct. The next ministerial meeting, scheduled for December 1, will be crucial in determining the group's future production strategy.
The information in this report, obtained by Platts through industry sources, shipping data, and satellite and inventory analyses, provides detailed insight into the challenges and adaptations of OPEC+ in an ever-changing market.
