OPEC oil output in May rises less than planned, Reuters survey finds

A Reuters survey indicates that OPEC oil output in May increased by 150,000 barrels per day to 26.75 million bpd, falling short of the planned 310,000 bpd increase due to compensation cuts by Iraq and lower exports from Saudi Arabia and the UAE. While Saudi Arabia saw the largest increase at 130,000 bpd, Iraq reduced output to meet compensation commitments, and the UAE also pumped below its OPEC+ quota, raising concerns about OPEC+ compliance and potentially affecting global oil supply dynamics.

Analysis

OPEC's crude oil output in May rose by 150,000 barrels per day (bpd) to 26.75 million bpd, an increase notably below the planned volume, as indicated by a Reuters survey. This shortfall stemmed primarily from Iraq implementing additional production cuts to compensate for previous overproduction, coupled with Saudi Arabia and the United Arab Emirates (UAE) delivering smaller output hikes than their quotas allowed under the OPEC+ agreement. Specifically, five OPEC members—Algeria, Iraq, Kuwait, Saudi Arabia, and the UAE—who were scheduled to collectively increase output by 310,000 bpd, achieved an actual combined rise of only 180,000 bpd. Saudi Arabia contributed the largest individual increase of 130,000 bpd. The UAE also produced below its designated OPEC+ quota in May, reportedly to reflect its relatively minor commitments for compensation cuts. This dynamic occurs as OPEC+ accelerates its strategy to unwind its most recent layer of output reductions, though the market impact is theoretically limited by these concurrent compensatory cuts. A significant point of contention and uncertainty remains the wide variance in production estimates for Iraq and the UAE, with entities like the International Energy Agency reporting substantially higher output figures than OPEC's secondary sources or the countries' own data, complicating precise assessments of global oil supply.

Key Decisions for Investors

• The lower-than-anticipated OPEC output increase in May suggests a tighter near-term supply scenario, which could offer modest support to crude oil prices; investors should closely monitor OPEC+ production discipline and adherence to compensation cuts in the coming months.
• Significant discrepancies in reported production figures for key OPEC members, particularly Iraq and the UAE, underscore the importance of consulting multiple data sources, including official OPEC reports, IEA assessments, and independent tracking services, to obtain a more comprehensive view of actual global oil flows.
• Given OPEC+'s strategy of unwinding cuts while some members implement compensatory reductions, investors should evaluate the sustainability of this constrained supply growth and its potential impact on global oil inventories and market balances going forward.