Commodity Insights - Energy & commodities navigate new trade dynamics
OPEC+ steers through uncertainty
2025-03-08 02:54:17
Rosemary Griffin dissects how Trump’s policies and the rise of non-OPEC crude supply could reconfigure crude flows and impact OPEC+’s production goals
OPEC and its allies face a tricky market in 2025, with the oil market outlook clouded by significant unpredictability around geopolitical events and fundamentals.
An uptick in oil prices in early 2025 initially provided welcome relief for the group, which stuck to major output cuts through 2024 in a bid to prop up prices.
A new round of sanctions targeting Russian crude exports announced January 10, alongside cold weather in the Northern Hemisphere and optimism around Chinese economic growth, pushed oil prices to $83/b January 15 for the first time since August 2024.
Prices have since fallen back, however, with Platts, part of S&P Global Commodity Insights, assessing Dated Brent at $77.05/b on January 31.
Further price volatility is likely on the back of US President Donald Trump’s policies, which have already included introducing tariffs on key oil market players Canada, Mexico and China, and may include tightening sanctions on OPEC+ members Russia, Iran and Venezuela.
OPEC+ delegates told Commodity Insights that the group was proceeding cautiously due to the US leader’s unpredictability. One senior OPEC official said the bloc was seeking “sustainable clarity” on the market as Trump’s flurry of executive orders were signed.
Kazakhstan has hinted at OPEC+ coordinating a response to Trump policies, but the group has yet to do so. Delegates said that the issue was not on the agenda at a meeting of the Joint Ministerial Monitoring Committee (JMMC) – which oversees the OPEC+ agreement – held February 3.
Trump has also publicly lobbied Saudi Arabia and OPEC to pump more crude. OPEC has not responded to the request or indicated that it will amend output plans or abandon its alliance with Russia and its other non-OPEC allies. If it were to reverse current policy and start a battle for market share, this could seriously affect oil prices and undermine Russia’s ability to finance its war in Ukraine.
This war, as well as the conflict in the Middle East, are adding to market unpredictability. They continue to pose risks of damage to production and supply infrastructure, and could trigger changes to sanctions policies.
Commodity Insights forecasts Dated Brent to average $74/b in 2025 and $69/b in 2026, which could prove too low for some OPEC+ producers and complicate plans to bring barrels back to market in the second quarter.
OPEC+ currently plans to ease some 2.2 million b/d of voluntary cuts from April.
Three times in 2024, eight members – Saudi Arabia, the UAE, Kuwait, Kazakhstan, Algeria, Oman, Iraq and Russia – delayed plans to gradually reintroduce 2.2 million b/d of voluntary cuts, due to weak prices.
A further 3.6 million b/d of groupwide cuts are in place until the end of 2026.
The next OPEC+ JMMC meeting is scheduled for April 5. A full OPEC+ ministerial meeting is slated for May 28. The group can hold extraordinary meetings if they see market conditions requiring a change in strategy.
Compliance woes
Quota compliance figures are to remain at the forefront of OPEC+ concerns, as any production leakage could further undermine the group’s efforts to bolster prices.
Overproducers, particularly Iraq, Kazakhstan and Russia, came under pressure in 2024 to curb their quota cheating, with varying degrees of success.
Members with quotas under the OPEC+ deal pumped 23,000 b/d above their collective targets in December 2024, according to the Platts survey by Commodity Insights released in January. This was an improvement on overproduction of 91,000 b/d in November.
Iraq and Kazakhstan continue to be under close scrutiny in early 2025. Both countries cut output in December compared with November, contributing to improved compliance.
Iraqi production is likely to fall further in January after a fire at its Rumaila oil field took an estimated 300,000 b/d offline.
In contrast, Kazakhstan could to struggle to keep to its target, after expanding its major Tengiz field, which is set to boost the project’s crude output capacity by 260,000 b/d.
OPEC said February 3 that overproducers will submit revised compensation plans for overproduction since January 2024 to the OPEC Secretariat by the end of February.
OPEC cut its estimated “call” on OPEC+ crude – the quantity the alliance must produce to balance the market – by 100,000 b/d for 2025 to 42.5 million b/d in its report released January 15. This is well above the group’s December output of 40.65 million b/d, according to secondary sources used by OPEC to estimate crude production.
It sees global oil demand growing by 1.4 million b/d year over year in both 2025 and 2026, with solid economic activity in Asia and other non-OECD countries underpinning demand growth over the next two years.
This is well above forecasts from some other market watchers, including the International Energy Agency (IEA).
The IEA sees global oil demand growth at 1.05 million b/d in 2025, up from 940,000 b/d in 2024.
Growing crude output outside OPEC+, particularly in the Americas, is also set to be an ongoing problem for OPEC+, eroding the group’s market share and ability to impact prices.
OPEC forecasts non-OPEC+ production to grow by 1.1 million b/d year over year in 2025, and at the same level in 2026.
This could prove too much for OPEC+ to fully roll back its output cuts.
©IHS Global, Inc.. View All Articles.