OPEC Operation Tabula Rasa
The producer group is now set to wind up its latest and largest production cut tranche as soon as September—but there will still be ~3.6 MMbpd of additional, withheld oil left on the books.
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OPEC+ further accelerated its production hikes to 548 kbpd for August, putting the group on track to complete its unwinding of the latest cut tranche by September.
This then turns both OPEC+’s and the market’s attention to the two remaining cut tranches: 2 MMbpd agreed to in October 2022 and 1.66 MMbpd in April 2023.
However, that nearly 4 MMbpd combined pool of supply still officially off the market after this cut unwind wraps up in September may be nearer 2 MMbpd after factoring for current overproduction and outdated production baselines.
Rationalizing the current cut structure would be a valuable step for the producer group to bolster both the effectiveness and proportionality of its production policy.
On the other hand, there are a number of practical, political, and strategic reasons that OPEC might not want to push forward with a full hard reset, now or ever.
OPEC will likely, as recent history has shown, take some kind of middle ground path—as long as market pricing doesn’t first derail the rationalization effort.
The subgroup of the eight heaviest-cutting OPEC+ members recently surprised markets by announcing a “quadruple” production hike of 548 kbpd for August. After that, there is only 548 kbpd of the total 2.5 MMbpd tranche outstanding, and the producer group is on track to complete its unwinding efforts by September. In other words, OPEC+ will have returned the full 2.5 MMbpd of withheld barrels to market in just 6 months compared to the far more gradual 18-month plan communicated as recently as the first quarter of 2025.
And, while the market has been acutely focused on this 2.5 MMbpd supply tranche, this current unwinding effort will not bring OPEC+ back to square one; the group has two other tranches of production cuts (circa October 2022 and April 2023) to which its—and our—attention can now shift. So, what is OPEC to do about the remaining cuts still lingering on the books, which together on paper amount to roughly 3.6 MMbpd?
There’s an argument that OPEC should keep going while it has the momentum, especially so long as crude prices continue to remain relatively resilient. But, will OPEC+ keep unwinding the other two cut tranches? Let’s take a look at the reasons both in favour and against continuing to plow through the easing of current production cuts, as well as how many barrels are really still waiting in OPEC’s wings.