OPEC+ will increase production in May twice as fast as planned
OPEC+ accelerates the removal of restrictions on oil production and in May increases production volumes by 411 thousand barrels per day. This corresponds to three monthly increase. The quota for the Russian Federation for this month has been increased from previously planned 9.03 million to 9.08 million barrels per day. Analysts warn about the risks of reducing world demand for oil due to US duties and the possible drop in quotations to $ 60 per barrel.
OPEC+ countries will increase in May the total extraction volume by 411 thousand barrels per day (b/c), which is equivalent to three monthly allowances. The organization about this reported According to the results of the meeting on April 3. According to the new plan, the quota of Russia in May is 9.08 million b/s. The previous plan implied the Russian Federation’s exit to this level in July. Quota for Saudi Arabia in May was increased to 9.2 million b/s. Accordingly, quotas and other participants in the alliance are increased.
The OPEC+ statement says that the decision made is related to the ongoing improvement of fundamental market factors and a positive forecast, and will also allow the Alliance to continue maintaining the stability of the market.
At the same time, the participating countries will have the opportunity to accelerate overproduction compensation. New compensation schedules will be presented to the OPEC+ Secretariat by April 15, it is said in the message. The Government of the Russian Federation noted that eight OPEC+ countries confirmed their commitment to voluntary oil production adjustments, as well as the intention to fully compensate for any overproduced volume since January 2024.
The OPEC+ recalled that a gradual increase in production can be suspended or canceled depending on market conditions. World oil prices negatively reacted to OPEC+. At 19:20 Moscow time, the June futures of Brent brand fell by 6.72%, up to $ 69.9 per barrel. Although the rate of the fall slowed down by evening: at 18:00 Moscow time, quotes were reduced by more than 7%.
An expert at the Financial University under the Government of the Russian Federation Igor Yushkov says that the accepted OPEC+ measure is “negative for Russia and is extremely untimely.”
According to him, there are risks of reducing oil demand due to US Donald Trump, which can slow down global trade introduced by US President. If its volumes are reduced, this will lead to a drop in demand for fuel and the world economy for the first time after the pandemic may enter into a recession, the expert points out. According to S&P Global analysts, a decrease in the growth rate of global GDP by about 1% threatens to reduce oil demand by 0.5 million used in 2025. The OPEC+ solution also creates additional pressure on the cost of oil, which, according to Igor Yushkov, may drop to $ 60 per barrel.
69.7 dollars per barrel
– The average price of Urals oil, laid down in the budget of the Russian Federation for 2025.
According to Mr. Yushkov, such a decrease in prices is especially disadvantageous for the Russian Federation, since the discount on Russian oil of the Urals brand remains, and the ruble is strengthened to the dollar. Both of these factors negatively affect the income of the Russian budget from the export of hydrocarbons, where the average price of $ 69.7 per barrel of Urals is laid for 2025. At the same time, Igor Yushkov does not exclude that OPEC+ can revise his policy if the price of oil in the global market approaches $ 60 per barrel. In this case, in May, the Alliance is able to postpone its decision to increase production, he adds.
Senior BCS analyst Kirill Bakhtin states that OPEC+ decision indicates a firm intention of eight key participants in the Alliance to abandon additional voluntary restrictions adopted in early 2024.
He explains that in recent years, OPEC+ countries have reduced their own prey, but then they could not restore volumes due to the fact that the lost market share was occupied by those who were not included in the alliance. Now OPEC+ is just getting out of this closed circle, the analyst believes.
According to him, an increase in production in excess of initial plans at a price of $ 75 per barrel is more justified than at $ 70 per barrel and lower. Prior to OPEC+ oil price was about $ 75 per barrel. Mr. Bakhtin notes that such a cost was formed due to US threats to introduce trade duties on oil from Iran, Venezuela and Russia. The price was also influenced by the news of the reduction of oil shipments according to the Caspian pipeline consortium (KTK) system almost double (see. « Kommersant » from April 1). The analyst also draws attention to the fact that oil production in the United States in the beginning of this year is quite stable – about 13.6 million b/s. For this reason, OPEC+ does not see the threat of significant growth in oil production in the United States, even at the Brent price of $ 70–75 per barrel, said Kirill Bakhtin. BCS forecast for the average price of oil for 2025 – $ 70 per barrel.
