Opec+ has made significant moves in recent months, shifting from a neutral to a more aggressive stance. After a period of gradual production increases, the group, led by Saudi Arabia, has opted for a sharp rise in output, signalling a strategic push to regain market share. However, with key members such as Iraq and Kazakhstan failing to meet targets, the question remains: who will bear the brunt of this shift in policy, and how successful will Opec+ be in achieving its objectives?
In March, the wider Opec+ group, comprising eight countries, began gradually increasing production after months of paused expansion. The UAE, one of the most affected nations, saw its baseline production target increase by 300,000 barrels per day , a relatively modest but crucial adjustment. This was anticipated by many in the industry, yet the more surprising decision came last month, when the group announced an even more aggressive policy. Opec+ would bundle three monthly production increases into one, effectively raising output by 411,000 bpd for the coming period.
The decision reflects a departure from previous hesitations, indicating that Opec+ is now willing to tolerate lower oil prices for a period in an effort to reclaim market share. At the current rate, the voluntary production cuts of 2.2 million bpd, which were introduced in November 2023, would be entirely unwound by September. However, the compensation cuts, designed to offset previous overproduction, will remain in place for some countries until at least June of next year.
Demand projections for oil in 2025 range from 730,000 bpd according to the International Energy Agency to 1.3 million bpd as per Opec’s own forecast. Alongside this, the IEA predicts production growth outside the Opec+ group will increase by 1.3 million bpd. The impact of these developments on oil prices is complex; with economic uncertainties deepening and oil prices already softened in previous months, the question now is: who will suffer as Opec+ ramps up production?
Saudi Arabia’s frustration with non-compliant members has been evident, particularly with countries like Iraq and Kazakhstan. Iraq, for example, is overproducing by a significant amount, with its oil output expected to hit 3.981 million bpd in March, far exceeding its agreed limit of 3.909 million bpd. The Iraqi government has faced numerous internal challenges, including large fiscal deficits, an expanding population, and deteriorating infrastructure, all of which make the country vulnerable to any declines in oil prices.
Despite these difficulties, Iraq, along with the UAE, is in a strong position to expand its production in the coming years, primarily driven by foreign investments. So far this year, Iraq has cut about 190,000 bpd, showing some signs of compliance, although its future ability to meet Opec+ targets remains uncertain. The legal disputes over oil exports from the semi-autonomous Kurdistan region and the need for oil to fuel power plants during summer months have also added to Iraq’s difficulties in meeting its commitments.
Kazakhstan, another key member, faces its own challenges. Although the country’s sovereign wealth fund, Samruk-Kazyna, holds substantial assets, the nation relies heavily on oil production from its key fields, such as Tengiz, Kashagan, and Karachaganak, which make up 70% of its total output. These fields have international partners whose decisions regarding production levels complicate Kazakhstan’s ability to adjust output in line with Opec+ agreements. Despite its lack of immediate economic pressure to comply, Kazakhstan has signalled that it will act in accordance with national interests, meaning that it is unlikely to make immediate adjustments to its production levels.
Unlike Iraq, Kazakhstan is in a relatively strong position financially, with its reliance on oil revenue being less than a third of its overall income. The country’s burgeoning mining sector, especially in gold and uranium, has provided an additional buffer against fluctuating oil prices. However, Kazakhstan’s overproduction could still have consequences for the Opec+ deal, especially if other members begin to demand similar increases in output. If Russia, for example, were to leverage its influence over Kazakhstan, there could be further shifts in production targets.
One of the most significant impacts of Opec+’s actions will likely be felt outside the group, particularly in the United States. While Opec+ has not directly targeted US oil output, the rising production limits within the group could force American shale oil producers to scale back operations. The high cost of US shale production, coupled with tariffs and lower global prices, makes it difficult for many companies to sustain growth. Diamondback, a major operator in the Permian Basin, has already suggested that US onshore oil production may have peaked, and a decline in output could shift market dynamics in Opec+’s favour.
