OPEC+’s struggles go beyond supply constraints

OPEC+ crude production fell in May compared with April, according to Petroleum Economist analysis, but the decline does not signal tighter market discipline or a coordinated effort to constrict global supply. Instead, the latest figures point to a familiar pattern of uneven compliance, persistent overproduction by some members and a market shaped more by Middle Eastern logistical constraints, inventory drawdowns and strategic stock releases than by formal quota policy.

The group’s output fell by 0.32m b/d, as several core members struggled to increase production even as OPEC+ continued to unwind voluntary cuts. Several core members are struggling to meet their baselines, painting a complex picture of a fractured energy landscape. The situation is unlikely to change until the Strait of Hormuz is open to marine traffic again.

OPEC core members: Output falls despite higher targets

Production from the eight OPEC members bound by quotas fell to 11.66m b/d in May, down 290,000b/d from April. The decline was driven mainly by Saudi Arabia and Kuwait. Saudi output fell by 200,000b/d, to 6.60m b/d, well below its 10.23m b/d quota. Riyadh continued its strategic policy of routing as many export barrels as possible to the western port of Yanbu to mitigate operational risks and reduce reliance on the volatile Strait of Hormuz.

Production from the eight OPEC members bound by quotas fell to 11.66m b/d in May, down 290,000b/d from April

Domestically, the 440,000b/d Jazan refinery remained in an extended turnaround for most of the month, coming back online only in the final week of May. Internal estimates also indicate Saudi Arabia increased direct crude burn in its domestic utilities to meet seasonal air-conditioning demands. Kuwait recorded an even steeper month-on-month fall, down 110,000b/d, to 0.59m b/d, against a quota of 2.61m b/d. Elsewhere in the core OPEC group, minor adjustments were observed. Algeria edged lower by 0.01m b/d, to 0.96m b/d, while West African producers Nigeria and Gabon posted marginal gains of 0.02m b/d and 0.01m b/d, respectively.

The combined headline compliance rate for the OPEC-8 shot up to an extraordinary 142%. However, this metric is highly misleading, as it reflects structural underproduction and capacity degradation rather than deliberate, proactive market restraint. Iraq remains the clearest example. It produced 1.40m b/d against a quota of 4.33m b/d, yielding a headline compliance rate of 168%. That figure reflects unrealistic baselines under present circumstances rather than deliberate restraint. The Kirkuk–Ceyhan pipeline remains Iraq’s only major operational export artery, while shipping volumes through Southern ports and the Strait of Hormuz remain severely depressed due to regional security factors.

Quota-exempt producers: Iran drops, Venezuela edges higher

Among the three OPEC states exempt from quotas, Iran recorded the sharpest decline, falling by 250,000b/d, to 2.65m b/d, after months of growth. This marked the most severe contraction in this sub-group, ending a multi-month streak of aggressive supply expansion. While Tehran sought to divert more crude oil for domestic refining, a tightening US maritime blockade severely curtailed its export channels. Conversely, Venezuela's state-backed recovery continued its slow upward trajectory, gaining 50,000b/d, to reach 1.10m b/d. Total output from the 11 OPEC members fell to 16.71m b/d, down 490,000b/d from April.

Non-OPEC participants: Russia and Kazakhstan lift output

Outside the OPEC-11, quota-bound participants modestly increased output in May to 12.73m b/d, up from 12.56m b/d in April, with Russia and Kazakhstan leading the rise. Russian production rose to 9.00m b/d from 8.90m b/d, despite ongoing drone attacks on oil infrastructure. Kazakhstan’s output ticked up by 60,000b/d, to 1.86m b/d, completely overshooting its 1.59m b/d quota and lowering its compliance rate to 83%. Kazakhstan’s overproduction underscores how difficult voluntary restraint becomes when non-OPEC producers face intense domestic fiscal pressure to protect state revenues and global market share.

Overall, the non-OPEC quota coalition reached a 106% compliance rate, about 6% below its total limit. Smaller players, such as Bahrain (174% compliance) and Sudan (153% compliance), over-complied significantly due to infrastructural restraints, natural field declines and political instability, thereby offsetting Kazakhstan's overproduction. Meanwhile, Mexico, which participates in OPEC+ discussions but does not adhere to the quota framework, held steady at 1.39m b/d.

Outlook: Rising targets, limited capacity, and market uncertainty

Looking ahead, OPEC+ remains on course to manage global supply closely and plans to raise its collective July production ceiling by another 188,000b/d. However, the forward-looking supply outlook remains highly fragile, and the group's structural framework is becoming increasingly difficult to manage politically and technically.

Three core macroeconomic pressures are expected to cloud the supply situation and the crude market for the remainder of 2026:

1. Revenue pains and fractured compliance: Compliance is becoming increasingly fragmented. While structurally constrained African and Middle Eastern nations consistently underproduce, unconstrained producers are repeatedly exceeding their quotas to maximise near-term cash flows. Should crude prices weaken, the risk of non-compliance or even a price war increases. Deprived of critical oil revenues, several vulnerable governments have the incentive to abandon compliance altogether to maximise volume and offset severe fiscal deficits.

2. Opaque global inventories: Commercial inventory drawdowns and government-mandated strategic reserve releases are distorting real-time physical demand signals. While OECD crude stock data remains highly transparent and trackable, non-OECD inventory data, particularly in major Asian consuming hubs, remains completely opaque. This lack of transparency makes it extremely difficult for OPEC+ planners to accurately gauge global consumption requirements.

3. Phantom demand and macroeconomic challenges: Sustained high nominal oil prices are beginning to weigh heavily on downstream industrial demand. There is growing concern among energy economists that the recent push by nations to replenish depleted strategic stockpiles is creating a wave of ‘phantom demand’. This initial surge in apparent consumption could quickly fizzle out before the end of Q3, leaving the global physical market heavily oversupplied. Compounding this risk are fractured maritime supply chains and lingering geopolitical volatility in Eastern Europe and the Middle East, which continue to artificially disconnect paper oil prices from the underlying physical reality. Ultimately, these compounding structural and macroeconomic pressures ensure managing the OPEC+ quota framework will remain a deeply sensitive, highly contentious and technically fraught endeavour throughout the second half of the year. An audited, annual Maximum Sustainable Capacity mechanism—designed to bring greater transparency and fairness to compliance—to be introduced later this year might not be able to bridge the differences among members.

FIG.1: OPEC+ PRODUCTION SURVEY

Source: Petroleum Economist