OPEC+ Announces Major Oil Production Cuts by Russia, Kazakhstan, Iraq

In a move to balance the global oil market, Russia, Kazakhstan, and Iraq will gradually reduce their oil production by a total of 2.284 million barrels per day (b/d) from now until September 2025.

This announcement was made on Wednesday by the Organization of the Petroleum Exporting Countries (OPEC) Secretariat.

The decision follows the submission of compensation plans by OPEC+ members Russia, Kazakhstan, and Iraq, for exceeding their crude production targets during the first six months of 2024. Specifically, Iraq, Russia, and Kazakhstan overproduced by 1.184 million b/d, 480,000 b/d, and 620,000 b/d, respectively. OPEC+ underscored the “critical importance of adhering to full conformity and the compensation mechanism.”

According to the compensation schedule, OPEC+ countries will maintain oil production at 35.52 million b/d in July, slightly below the pre-compensation target of 35.6 million b/d, which was also the level planned for June. The most substantial deviation from the production schedule is expected in October 2024, with a reduction of 355,000 b/d. Additionally, Kazakhstan’s Ministry of Energy announced upcoming repairs at the Kashagan field, contributing to the production reduction.

Looking forward, the most significant deviations from the plan, excluding repairs, are anticipated in August and September 2025, with reductions of 177,000 b/d and 195,000 b/d, respectively. By September 2025, OPEC+ aims to increase oil production to 37.88 million b/d.

For Russia, major production cuts will commence in March 2025, targeting a production level of 9.34 million b/d by October 2025. In June 2024, Russia produced 9.139 million b/d, slightly above its obligations, but plans to reduce this to 8.98 million b/d in July.

Last month, OPEC+ extended a 1.65 million b/d cut, initially set to expire at the end of this year, until the end of 2025. Concurrently, a cut of 2.2 million b/d, introduced in November 2023, will be gradually phased out by September 2025. This means OPEC+ will continue to limit oil supply for the next 18 months, though some additional barrels will start entering the market later this year.

However, these production cuts will be partially offset by growth in non-OPEC production. OPEC predicts that non-OPEC supply will grow by one million b/d in 2024, which is 100,000 b/d lower than its previous forecast. In 2025, non-OPEC supply growth is expected to be 1.3 million b/d, also trimmed by 100,000 b/d from earlier estimates. The majority of this growth will come from the US, Brazil, Canada, Russia, Kazakhstan, and Norway.

The US Energy Information Administration (EIA) forecasts US crude oil production to rise to 13.19 million b/d this year, with an additional increase of 460,000 b/d by 2025, reaching an all-time high of 13.65 million b/d.

With these adjustments, OPEC+ aims to balance the market and support oil prices amidst fluctuating global demand.