OPEC’s Production Policy Under Scrutiny Amid Market Pressures
The Joint Ministerial Monitoring Committee, which oversees the OPEC crude oil production agreement, is poised to maintain its current production policy during a scheduled meeting on February 3, especially in light of decreasing price gains observed in early 2025. The organization is grappling with the implications of supportive measures for oil from U.S. President Donald Trump, alongside OPEC’s own invitations to ramp up production. This context heightens the potential for price volatility and unfavorable market conditions as OPEC contemplates returning additional barrels to the marketplace.
As of now, there are no indications from OPEC suggesting a shift in its production strategy or a departure from its alliance with Russia and other non-OPEC partners. Should OPEC alter its current course and a competitive market landscape ensue, the consequences for oil prices could be significant, particularly threatening Russia’s capacity to fund its ongoing military operations in Ukraine. Recent days have seen Brent crude trading at approximately $77.47 per barrel as of January 30, up from $74.65 at the close of 2024. Prices hit a peak of $83 per barrel in mid-January following the implementation of heightened sanctions by the outgoing Biden administration against Russia, a major non-OPEC oil producer.
Ahead of the upcoming joint ministerial meeting, a delegate commented, “We do not anticipate any changes.” Meanwhile, OPEC and its allies are currently planning to incrementally increase crude production shares starting in April. Notably, OPEC is currently withholding about 5.8 million barrels per day from the market, with eight countries—including Saudi Arabia, Russia, Iraq, and the UAE—implementing voluntary cuts totaling 2.2 million barrels per day. These reductions have already faced delays.
The group retains the flexibility to convene additional meetings or adjust policies in response to market conditions as they arise. The organization faces the complex challenge of balancing Trump’s production increase pressures with the need for unity among member nations. Jim Burkard, Vice President of Research at S&P Global Commodity Insights, highlighted that the timeline for OPEC’s responses to these pressures could be influenced by internal dynamics and cohesion within the coalition.
On January 29, Kazakhstan indicated a willingness by OPEC to coordinate a response to the policies articulated by Trump, although another delegate stated that U.S. policies were not on the agenda for the February 3 discussions. The rise in competing production, particularly from the United States, has emerged as a significant concern for OPEC in recent years and is expected to continue shaping its strategy into 2025. OPEC anticipates non-OPEC production to increase by 1.1 million barrels per day on an annual basis in both 2025 and 2026.
Analysts are assessing the extent to which Trump’s policies may lead to substantial production increases in the near term, noting that oil prices are predominantly influenced by financial markets on Wall Street, and by U.S. production capacities. While the Trump administration seeks to lower crude oil prices, it concurrently risks initiating trade conflicts with key players in the oil sector, including Mexico, Canada, and China, which could disrupt supply and demand dynamics.
Internal to OPEC, member producers will continue to be closely monitored throughout 2025, particularly if oil prices remain below the $80 per barrel threshold. The cartel’s compliance level improved in December 2024, with an excess of 23,000 barrels per day being produced over the target, contrasting with a surplus of 91,000 barrels per day in November, according to the latest OPEC reports. Furthermore, in December, both Iraq and Kazakhstan undertook production cuts, with Iraq expected to reduce output even further in early 2025 due to operational setbacks at the Rumaila oil field.
Kazakhstan faces challenges in meeting its production forecasts after initiating an expansion project for its Tenzing field, which is expected to elevate production capabilities by approximately 260,000 barrels per day. Kazakhstan has set its aim to boost crude oil and condensate output to about 1.93 million barrels per day by 2025, an increase from the 1.76 million barrels per day anticipated in 2024, with a goal of reaching around 2 million barrels per day by 2026.
These dynamics underscore the critical role that both Iraq and Kazakhstan will play in shaping OPEC’s production strategies and overall coalition unity in the months ahead.