The Organization of the Petroleum Exporting Countries (OPEC) and allies, including Russia, are known collectively as OPEC+ and will meet on June 2 to discuss their joint oil production policy. Analysts are divided over whether the oil-producing group will extend voluntary oil output cuts of 2.2 million barrels per day.
OPEC+ is working to agree on the oil production capacity for its member countries by the end of 2024. This has created tensions in the past as each nation’s output target is calculated from its notional capacity, according to news agency Reuters. OPEC+ members tend to push for higher capacity to get higher output targets after the percentage cut required by the group is factored in.
OPEC+ has been curbing output to support the upside in prices. However, commodity analysts have highlighted that the oil market is currently over-supplied, especially because of record-high crude output from the US, which has limited the upside swing for Brent crude prices so far this year.
Here’s why OPEC+ nations clash on output policy
Saudi Arabia, OPEC’s de facto leader and the world’s third-largest producer, said that countries with expanded capacity should be rewarded for their investment. The countries that have built more capacity such as the United Arab Emirates (UAE) would like to use some of it to get a return on their investment.
Other countries such as Nigeria have struggled to meet their existing targets due to a lack of investment and maintenance. Even if countries cannot hit their targets, they do not like to see their own notional capacity cut by OPEC+ because that could mean a lower production quota. In December 2023, Angola quit OPEC after arguing it was assigned a lower capacity than it deserved and would have to make deeper output cuts than needed.
OPEC has a long history of distrust when it comes to members submitting their own data, whether production or capacity, according to Reuters. In June 2023, OPEC+ revised down production targets for Nigeria and Angola after they failed to meet previous targets because of underinvestment and security issues. That triggered Angola’s eventual departure. The June 2023 meeting also raised the UAE’s output targets.
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Published: 28 May 2024, 10:39 PM IST
