Economic Analysis – Baghdad
Recent developments within OPEC have surfaced concerning “internal discontent” and a prevailing sense of “productive chaos,” prompting a pivotal decision to boost oil production for the first time since 2022. This decision comes in light of Kazakhstan’s non-compliance with production quotas and reduced output from various other member states.
The organization has resolved to initiate an increase of 138,000 barrels per day starting in April, marking a phased approach to alleviate ongoing production cuts, which currently total approximately 6 million barrels per day—about 6% of global demand.
Kazakhstan’s current production levels are surpassing its allocated share within the OPEC framework, leading to complaints from several members, including Saudi Arabia, the organization’s largest producer, who have expressed concerns regarding Kazakhstan’s elevated output.
Insider reports indicate that tensions within OPEC+ are rising as the rationale behind maintaining production restrictions becomes less tenable when some members are not adhering to their assigned production levels. One source commented, “Continuing to impose restrictions on production is illogical if certain OPEC+ members are exceeding their quotas.”
Furthermore, the same source noted, “This situation undermines discipline within OPEC+, and significant pressure will be placed on Kazakhstan to rectify this issue.”
Concurrently, the decision to adjust production levels follows renewed calls from political figures for OPEC and Saudi Arabia to lower oil prices, with a commitment to address fuel costs for American consumers. However, it has been clarified that such external pressures did not substantially influence OPEC’s deliberations. Instead, the increased production aligns with the interests of certain member states like the UAE and Russia. Notably, the UAE has advocated for increased production capacity for two years, aiming to leverage its growing reserves. Meanwhile, Russia views potential production increases as beneficial for its diplomatic relationships, particularly with the United States.
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