OPEC+ Members Struggle with Production Quotas, Undermining Market Stability
Several OPEC+ members, notably Iraq, Kazakhstan, and Russia, continue to overproduce despite pledging to adhere to quotas. This non-compliance undermines the effectiveness of OPEC+’s production cuts and casts doubt on the group’s ability to balance the oil market. OPEC has extended the deadline for compensating for overproduction to September 2025, but there are few signs that the offending countries will comply.
Brent oil prices have recently topped $87 per barrel, a reason for OPEC and OPEC+ to celebrate. However, this price rise is not due to the OPEC+ members who have failed to comply with their production cuts. Instead, the rally results from strong demand and concerns about supply during the hurricane season.
Overproduction by some OPEC+ members, especially Iraq, Kazakhstan, and Russia, remains a problem. The alliance has tentative plans to ease part of the voluntary cuts in the fourth quarter of this year, depending on market conditions.
Saudi Arabia, OPEC’s top producer and de facto leader, has adhered to its pledge to pump 9 million barrels per day (bpd) of crude. In contrast, other OPEC+ producers, including Iraq, the second-largest OPEC producer, have not complied with the current cuts despite promises to improve discipline.
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OPEC has given these countries until September 2025 to compensate for recent overproduction. However, there is little evidence that Iraq and Kazakhstan have reduced their output to their assigned quotas, let alone compensated for previous overproduction.
The lack of compliance from some OPEC+ members indicates that the group’s struggle to enforce production cuts is far from over. This sends a bearish signal to the oil market, as some production cuts exist only on paper due to several producers failing to meet their agreed targets.
Currently, Iraq and Kazakhstan are the main culprits. This is not the first time these countries have failed to comply. During the 2020-2021 period, Iraq and Kazakhstan exceeded their quotas and failed to compensate for overproduction, despite a compensation mechanism similar to the current one. According to internal OPEC+ documents obtained by Bloomberg, the backlog of additional cuts required from Iraq and Kazakhstan increased more than a year after the compensation plans were adopted.
This year, new compensation plans have been prepared for Iraq and Kazakhstan. Between January and March 2024, Iraq’s cumulative overproduction stood at 602,000 bpd, and Kazakhstan’s at 389,000 bpd, according to OPEC’s estimates.
At the June OPEC+ meeting, producers were given until September 2025 to compensate for previous overproduction. Recent production data from OPEC and surveys by Reuters and Bloomberg indicate that neither Iraq nor Kazakhstan has reduced production to the promised levels.
A monthly Reuters survey showed that OPEC’s oil production rose in June for the second month in a row, driven by higher output from Nigeria and Iran. Iraq’s production declined by 50,000 bpd but still exceeded its OPEC+ quota in June. Iraq, which has a production cap of 4 million bpd, pumped 4.195 million bpd in May, nearly 200,000 bpd above its target, according to OPEC’s secondary sources.
The Bloomberg survey for June showed Iraq reduced production by 30,000 bpd but remained around 250,000 bpd above its quota before considering compensation cuts. Kazakhstan also raised its oil production in June, exceeding its quota. Reuters calculations based on data from sources showed that Kazakhstan produced 1.538 million bpd of crude in June, about 70,000 bpd above its OPEC+ cap of 1.468 million bpd. Kazakhstan’s Energy Ministry stated that independent sources approved by OPEC+ found the country exceeded its quota by 45,000 bpd in May.
“Kazakhstan will address this overproduction and will fully comply in June, including complying with additional voluntary cuts,” the ministry said last month.
Russia also pledged to meet its oil production quota in June after exceeding its target output in May, according to its energy ministry.
While OPEC+ has started to publicly announce overproduction levels of individual members, it remains uncertain whether the group can enforce compliance from long-standing non-compliers. Continued overproduction could blunt the impact of the group’s cuts on the oil market.