Opec+ aims to reverse output falls in 2025

Opec+ production cuts in 2024 saw the alliance reduce its crude output to lower than even in the pandemic-hit years of 2021 and 2022. And while Opec+ plans to start unwinding some of these cuts this year, it is far from clear that there will be sufficient room in the market for this additional supply.

Opec+ members subject to targets reduced crude output by 1.66mn b/d to 33.96mn b/d in 2024, Argus estimates. This was an even bigger decrease than 2023's 1.44mn b/d and means that the alliance has taken 3.1mn b/d off line over the past two years — equal to about 3pc of global oil supply.

Saudi Arabia cut production by 650,000 b/d to 8.96mn b/d last year, the lowest since 2010. Russian production fell by 430,000 b/d to 9.15mn b/d, the lowest since at least 2010. Other big falls came from Kuwait, whose output dropped by 190,000 b/d to 2.43mn b/d, and Iraq, where production declined by 160,000 b/d to 4.13mn b/d — although this was still well above its 4mn b/d target.

Opec+ can at least claim that it has so far achieved its stated objective of ensuring oil market stability — average prices for Atlantic basin benchmark North Sea Dated in 2024 were only around $2/bl lower than in 2023 at around $80/bl. But this has come at a cost. While Opec+ has capped its output, countries outside the alliance have continued to boost production — eating into Opec+ market share. Whether Opec+ will stick to this approach is a key factor to watch in 2025. Pressure has been building from some members who want to increase output as soon as possible.

As things stand, Opec+ members are set to start unwinding 2.2mn b/d of voluntary crude production cuts starting in April over an 18-month period. But this is not certain, given that most forecasts show a market surplus this year. Opec+ continues to stress that the return of 2.2mn b/d — one of three cuts it is implementing — will depend on market conditions. For now, the alliance is in wait-and-see mode, particularly given the uncertainties associated with the return of Donald Trump as US president and its impact on the global economy.

As always, the extent to which Opec+ members complied with their individual output targets was a big issue in 2024. But on balance, the alliance's output last year was 40,000 b/d under its collective target. While serial overproducers such as Iraq, Kazakhstan and Russia attracted a lot of scrutiny and pledged to compensate for exceeding their targets, members such as Azerbaijan, South Sudan and Nigeria produced well below their own targets.

Without target

Another key development in 2024 was growing production from members of the group that do not adhere to targets — Iran, Libya and Venezuela. Iran boosted output by 380,000 b/d to 3.32mn b/d, the highest since 2018, despite the continuation of US sanctions on its oil exports. Similarly, sanctions-hit Venezuela increased production by 110,000 b/d to a six-year high of 870,000 b/d. Libya saw its production fall by 60,000 b/d to 1.11mn b/d — mostly owing to politically motivated shutdowns — but it ended the year at 1.4mn b/d, the highest in over a decade.

On a monthly basis, members subject to cuts saw very little change in their collective output in December, with production edging up by 10,000 b/d to 33.57mn b/d. This was 270,000 b/d below the group's target for the month. Notable changes included a 50,000 b/d increase from Nigeria, which saw its output climb to 1.54mn b/d — the highest since July 2020 — while Kuwaiti output increased by 40,000 b/d to 2.44mn b/d. But these increases were almost entirely offset by a drop from the UAE, whose production fell by 120,000 b/d to 2.85mn b/d owing to maintenance at one of its onshore fields.

Opec+ crude production*