OPEC+ production report

[dan_s]

From Bloomberg:

OPEC+ monthly crude oil production dropped sharply in March to a five-year low as the Iran war
closed the Strait of Hormuz and forced several members with storage constraints and export disruptions to cut output.

Eighteen of the 22 OPEC+ members participating in the group’s production cut deal recorded output below quota levels
for the eighth consecutive month. Excluding compensatory cuts, OPEC+ production quotas remained flat in March, the last of a
three-month break in quota increases. The group that agreed to voluntary cuts — Algeria, Iraq, Kuwait, Saudi Arabia, the UAE,
Kazakhstan, Oman, and Russia — began unwinding 1.65 million barrels per day (m b/d) of reductions in October 2025. < As I have posted here many times, the OPEC+ production quotas are meaningless because 18 of them cannot produce up to their quotas.

The 18 participants in cut agreement dropped their crude output levels by a combined 7.87m b/d in March to 28.24m b/d, with Iraq, Saudi Arabia, the UAE, and Kuwait driving most of the decrease. The figures are a BloombergNEF analysis of industry
surveys from the US Energy Information Administration, International Energy Agency, Organization of the Petroleum Exporting Countries, and Argus.

Total production was 8.49m b/d below quotas when excluding
compensatory cuts, and trailed effective quotas, or quotas that
include voluntary and compensatory cuts, by 7.27m b/d.

Iran war forces production cuts

With the Strait of Hormuz effectively shut by the war in the Middle East, some members cut production beginning early
March. Iraq, Saudi Arabia, the UAE and Kuwait were the most heavily impacted, collectively lowering their output by about
8.1m b/d.

Iraq had the largest drop in production, cutting output by 2.78m b/d in March after shutting production at its largest
fields, including the Rumaila field and the West Qurna 2 project early in the month. Total production fell to 1.60m b/d and
trailed quotas by 2.68m b/d.

Iraq exported a total of 18 million barrels of crude in March from its southern and northern fields, including in
Kurdistan, according to Ali Nizar, director general of the state-run oil marketing company, as reported by Asharq Business.
This is a sharp drop from Iraq’s pre-war oil export rate of about 3.5m b/d, or roughly 98 million barrels in February. The
country began exporting oil from its Kirkuk fields as of March 18 after reaching a deal with Kurdish authorities to resume
flows through a pipeline in the region. Exports from its northern fields resumed as of March 27 via a pipeline to the
Turkish port of Ceyhan on a tanker for Greece, based on ship tracking data compiled by Bloomberg.

With most of the country’s crude exports disrupted and storage reaching capacity, Iraq has declared a force majeure on
all oil fields developed by foreign oil companies as of March 17, as reported by Reuters, citing the country’s oil ministry sources.

Saudi Arabia cut production by 2.60m b/d in March, with total output dropping to 7.65m b/d and trailing quotas by 2.45m b/d.
The country’s crude oil exports fell by about half in March, with shipments averaging 3.33m b/d, based on tanker
tracking data compiled by Bloomberg; that value has since edged up to about 4m b/d of exports as of April 10. Most of the
exports were rerouted through Yanbu via the East-West pipeline, which reached its full capacity of 7m b/d as of March 28 —
comprising 5m b/d for export and 2m b/d supplied to the country’s refineries. A strike on April 8 damaged one of the
pipeline’s 11 pumping stations and reduced flows by 700,000 b/d, according to the state-run Saudi Press Agency, citing an energy
ministry official. The pipeline was restored to full capacity as of April 12.

As of April 1, about 55 million barrels of Saudi crude remained stuck in the Persian Gulf while the Strait of Hormuz
remains effectively closed. This included cargoes loaded in late February and early March.

Saudi Aramco halted operations as a precaution at the country’s largest oil refinery at Ras Tanura after a drone
strike on March 2, but restarted operations from March 18.

Kazakhstan increases output

Kazakhstan was among the few members to boost output in March, recording the group’s largest increase with a rise of
305,000 b/d. Total output reached 1.78m b/d, the country’s highest production levels since September, and exceeded quotas
by 207,000 b/d.
Following output cuts at the Tengiz venture and damages to the Caspian Pipeline Consortium during the first quarter of this
year, Kazakhstan now expects its oil exports in 2026 to drop 3% from previous year levels to 76 million metric tons, according
to Energy Minister Yerlan Akkenzhenov. Total exports during the first quarter fell to about 15.3 million tons, down from 19.7
million tons during the same period in 2025, he said.

Russia’s crude production in March was up 27,000 b/d from February’s figures, reaching 9.03m b/d. Output, however, trailed
quotas by 541,000 b/d, marking the 11th consecutive month that the country has underproduced.
While Russia has struggled with a buildup of its crude at sea since the beginning of 2025, the US waiver allowing
purchases of Russian oil loaded before March 12 brought some relief. As of April 12, Russian crude at sea had fallen to 103
million barrels, down from a peak of over 140 million barrels in January, based on vessel tracking data compiled by Bloomberg.

Indian refiners ramped up purchases of Russian crude in March, with imports rising to 1.9m b/d, the highest since June.
Executives at major Indian refiners said that even without an extension of the US waiver, which expired on April 11, buying is
likely to remain elevated due to limited alternative supply options, Bloomberg News reports.

OPEC+ boosts quotas in coming months < Again this is meaningless since 18 member countries have no more production capacity.

OPEC+ crude production for all 22 members (including non-participants) totaled 33.81m b/d in March, a month-on-month
decrease of 7.94m b/d. The group has resumed quota hikes at a slightly accelerated pace in April considering the Iran war,
upping quotas by 206,000 b/d. Quotas including compensatory cuts, however, will fall by 582,000 b/d, due to compensatory
cuts planned for Kazakhstan. May’s quotas will also be subject to a 206,000 b/d hike, but as long as Middle Eastern oil exports
remain disrupted by the war, the quota hikes will largely be theoretical.

BNEF estimates the global oil market lost roughly 8m b/d of supply in March, which likely pushed the market into a global
deficit. Supply losses are expected to deepen towards 11m b/d in April versus a no-war baseline, assuming the Strait remains
closed until at least mid-May.

The eight OPEC+ countries involved in the voluntary cuts will meet again on May 3.
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MY TAKE: Even if the Strait of Hormuz is totally open by the end of April (unlikely IMO) it will take at least six months and probably a year to restore supply/demand balance in the global oil market. OPEC+ is unlikely to ever get back to their total quotas because some members are on terminal decline.