OPEC+ Has Outline of Deal to Extend Cuts

OPEC+ ministers are gathering to discuss oil production policy
They already have the outline of a deal to extend “voluntary” supply cuts into the second half, delegates said
Talks continue on extending separate, group-wide curbs into 2025

One factor that could provoke OPEC+ to unveil a surprise today is the recent buildup in short positions in crude futures markets. Earlier this month, speculative Brent shorts held by hedge funds and other managers reached the highest level since the depths of the pandemic in late 2020.

It’s the kind of level that’s triggered a reaction in the past from the Saudis: Energy Minister Prince Abdulaziz bin Salman once threatened to leave bearish traders “ouching like hell.”

Oil Shorts Are Taking a Risk | OPEC+ weekend news could boost prices

Azerbaijan has seen production slip steadily since it joined OPEC+. A new production platform installed on the BP-led Azeri-Chirag-Gunashli project in the Caspian Sea, which accounts for most of the country’s output, may do little to reverse the slide, with volumes expected to reach just 24,000 barrels a day this year.

Azerbaijan's Oil Production | Azerbaijan has failed to reach even its reduced output target

Nigeria successfully negotiated an increase in its output target to 1.5 million barrels a day for this year. That’s up from the 1.38 million originally allocated to the country based on an initial assessment of its production capacity. It looks like those third-party assessments might have been right after all, with the nation falling further behind its new target each month.

Nigeria's Oil Production | Nigeria has failed to reach the higher output target it secured for 2024

Mexico rejected any output restrictions after June 2020. Although it has remained a member of the OPEC+ group, it hasn’t had a production target for the past four years. Even so, the country is struggling to meet its baseline production level of 1.75 million barrels a day amid a dearth of investment in new fields.

OPEC+ Underproducers | Nine OPEC+ members have consistently failed to reach their output targets this year

As previously mentioned, several OPEC+ countries have been pumping above their targets this year, according to secondary-source data published by OPEC. Iraq and Kazakhstan have been the biggest and most persistent overproducers, but there have been some other names on the list that might be more surprising:

OPEC+ Overproducers | Iraq and Kazakhstan have repeatedly pumped well above their targets

The Aramco share sale was covered across the offered price range. But it wasn’t immediately clear how much of the demand came from foreign investors.

There’ll be a lot of attention on overseas participation after global funds largely balked at the valuation expectation during the company’s mega IPO in 2019. That left the Saudi government mostly reliant on local money.

Here’s a look at how the output cuts have been shared among OPEC+ members:

OPEC+ Output Cuts | The group has three sets of output cuts running concurrently and is expected to extend those due to expire in June

OPEC+ meetings are increasingly limiting the level of media access to ministers. After late 2019, the group abandoned its famous — and raucous — pre-meeting media scrum. Since the end of the pandemic in late 2022, the organization has held only two press conferences.