Next week, the Organization of the Petroleum Exporting Countries (OPEC) and its allies will again be faced with the difficult decision of whether to extend production cuts or grow their own market share.
After months of voluntary production cuts, the decision is made ahead of an increase in oil production by the cartel planned for April.
End of March is the deadline for voluntary production reductions.
Recent chatter on the market suggests that OPEC+ could be interested in extending their voluntary output reductions beyond March.
Brent crude oil has fallen to $70 per barrel after briefly reaching $80 in January.
This decline is attributed to US president Donald Trump’s announcement of tariffs, and his demand for a higher supply from OPEC.
Kazakhstan production
The price of oil has fallen this week due to the possibility that Kazakhstan will increase its production.
According to the Kazakh Energy Minister, crude oil production will increase this year by nearly 10% and reach 96.2 millions tons.
Carsten Fritsch is a commodity analyst with Commerzbank AG.
Oil prices are likely to rise further if OPEC increases its supply in April.
According to Commerzbank AG it is difficult to imagine Kazakhstan increasing its production dramatically.
According to the German Bank, Kazakhstan committed as part of its OPEC+ deal to limit crude oil production at a maximum 1,47 million barrels a day.
Fritsch stated that “the other OPEC+ nations are unlikely to tolerate a significant exceedance of this goal.”
Other countries that have spare capacity such as Iraq and the United Arab Emirates could claim higher production themselves.
Non-OPEC Supply is Rising
According to the International Energy Agency, countries that are not part of OPEC+ will likely pump more oil in 2025.
The Paris-based energy monitor predicts that non-OPEC oil supplies will increase by 1,5 million barrels per a day in 2019.
The IEA had forecast a global growth in demand of 1.1m barrels aday by 2025.
The total oil supply will likely rise this year by around 1.6 million barrels a day, making the oversupply of crude or barrels about 500,000 per day.
Experts say that in such a situation, adding additional barrels from April to the market may not be to OPEC’s advantage.
Production cuts
The OPEC+ Meeting on December 5th, 2024 resulted in a unanimous decision to reverse production reductions over a period of 18 months.
The decision will result in a monthly production increase of 120,000 barrels / day, starting April.
The goal of this measured approach is to stabilize the oil markets by increasing steadily supply, while also monitoring global price and demand trends.
Novak, the Russian deputy prime minister said that an earlier postponement was not discussed.
Fritsch stated that “there are apparent doubts in OPEC+ about whether the market will be able to absorb additional supplies without risking a fall in the prices.”
Analysts at ING Group said that any delay could lead to a shift in oil balance and make the market tighter than expected.
The cartel has also agreed to a further 3.65 million barrels of production reductions per day, that will end at the beginning of 2026.
Trump and OPEC
Trump, who is now in his second term of office as President, had asked OPEC for an increase in oil supplies after assuming the presidency.
The price of Russian exports would also be reduced, which currently is used to fund the war in Ukraine by Moscow.
OPEC+ has yet to comment on Trump’s demand.
Fritsch stated that if the producers agreed to a three-month extension, it would allow for a discussion of the issue at the next OPEC regular meeting in May.
OPEC has signaled that it is more concerned about stabilizing the price of oil than increasing its market share.
Experts said that this could strain relations between OPEC, Washington and the United States in the long term.
Analysts at ING added that “any delay will not be well received by President Trump who has called on OPEC+ and other producers to boost supply.”
The post OPEC+ must decide whether to increase or extend market shares. This post may change as new information unfolds
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