OPEC+ retains 3.6 mil b/d of group-wide cuts through 2026

OPEC+ agreed to stick to plans to keep 3.6 million b/d of crude off the market until the end of 2026 at a meeting May 28, in a move that was widely expected.

In a statement released after the meeting, the OPEC Secretariat said it had been mandated to develop a mechanism to assess production capacity for all OPEC+ countries to be used as a baseline for 2027 quotas.

One delegate, speaking on condition of anonymity, told Platts that a key focus of the meeting had been "quota methodology."

OPEC said in December that the period for three external sources to assess production capacity to be used to set 2027 quotas is November 2026.

The OPEC+ meeting precedes a meeting of eight producers implementing voluntary output cuts scheduled for May 31, that analysts expect to have a bigger impact on near-term supply volumes and oil prices.

This smaller group's surprise announcements to raise output quotas by 411,000 b/d in both May and June have combined with concerns about trade tensions to erode oil prices in recent months.

Platts, part of S&P Global Commodity Insights, assessed Dated Brent at $64.26/b on May 27 -- down from $77.68/b at the beginning of April. OPEC+ announced its first surprise accelerated easing of cuts on April 3, a day after US President Donald Trump announced wide-ranging tariffs on global trade partners.

Commodity Insights sees prices falling further under the group's current plans.

"What we're going to see is more oil sold for less money. There is no price defense going on," Jim Burkhard, Commodity Insights vice president and head of research for oil markets, energy and mobility, said May 27 during the Middle East Petroleum & Gas Conference.

OPEC+ has recently preferred to use the voluntary cuts to respond quickly to market developments, with the eight producers meeting monthly. The group includes Saudi Arabia, Russia, the UAE, Kuwait, Kazakhstan, Algeria, Oman and Iraq,

They plan to discuss July quotas at the May 31 meeting, with some analysts predicting that they will again choose to accelerate unwinding their cuts, which had totaled 2.2 million b/d.

The change in strategy for the second quarter has been interpreted as a sign that OPEC+ is prioritizing regaining market share.

Analysts see US shale producers -- which have driven non-OPEC+ supply growth in recent years -- as most exposed to the impact of a sustained price slump. OPEC recently cut its forecasts for non-OPEC+ crude supply growth by 100,000 b/d in 2025 and 2026 in its monthly oil market report released May 14.

Harry Tchiliguirian, group head of research at Onyx Capital Advisory, said that as OPEC+ has been producing above quota for a while, the unwind would just legitimize oversupply.

"The actual amount of barrels that will be added to the market is unlikely to be anywhere near the paper increments of 1.4 million b/d," he said. "And even if we get more production out of Saudi Arabia (that has been in compliance) in the coming months, some of it will be absorbed by the seasonal increase in direct crude burn by utilities during the summer period," he said.

Platts estimates that OPEC+ producers with quotas overproduced by 171,000 b/d in April.

In the coming months, quota easing could be offset by compensation cuts being implemented by the seven members of the group that have overproduced since the start of 2024.

Voluntary cutters are submitting revised compensation plans to OPEC on a monthly basis, but some countries have struggled to meet these targets, most persistently Iraq and Kazakhstan.

The next full OPEC+ ministerial meeting is scheduled for Nov. 30, OPEC said May 28, when it will discuss the groupwide cuts. It has not made any changes to these cuts since December, when it extended them by one year until the end of 2026.

Both groups can call extraordinary meetings at any point if they think that market conditions require talks over policy changes.