Major oil-producing countries led by Saudi Arabia and Russia looked set to maintain their current output levels at a meeting yesterday, ahead of fresh sanctions against Moscow coming into force.
OPEC, which represents 13 of the world’s top oil-producing nations, was due to consult with 10 other oil producers, including Russia, to review their decision in October to cut production by 2 million barrels per day.
The OPEC+ videoconference was to take place after press time last night.
Photo: Reuters
On Friday, the EU, G7 and Australia agreed a US$60-per-barrel price cap on Russian oil, which is to come into effect today or soon after, alongside an EU embargo on maritime deliveries of Russian crude oil.
The measure seeks to prevent seaborne shipments of Russian oil to the EU, which account for two-thirds of the bloc’s oil imports from Russia, an attempt to deprive Moscow’s war chest of billions of euros.
While Russia on Saturday denounced the incoming price cap, threatening to suspend deliveries to any country that adopted the measure, Ukraine said the cap should have been set even lower.
For OPEC+, the big unknown in the oil equation is how heavily sanctions will hit Russian supply.
“The uncertainty for Russian supply is significant,” DNB analysts said.
OPEC would therefore “aim for a low-profile meeting that leaves existing production quotas unchanged,” they said.
Moscow’s threat to suspend deliveries to countries abiding by the price cap would put “some in a very uncomfortable position,” Oanda Corp analyst Craig Erlam said. “Choosing between losing access to cheap Russian crude or facing G7 sanctions.”
The choice of a virtual OPEC+ meeting instead of an in-person conference at the Vienna headquarters indicated a policy rollover, UniCredit SpA analyst Edward Moya said.
However, “deeper oil output cuts” could still not be ruled out at this stage, Moya added.
Amid economic gloom fueled by soaring inflation and fears of China’s weaker energy demand due to its COVID-19-related restrictions, the two global crude benchmarks remained close to their lowest level of the year, far from peaks in March.
Since the group’s previous meeting in early October, Brent crude and West Texas Intermediate have lost more than 6 percent of their value.
However, speculation that a further OPEC+ production cut might still be on the table boosted prices throughout the week.
“OPEC+ might feel compelled to adopt a more aggressive stance” by cutting or threatening to cut production even further, UniCredit analyst Edoardo Campanella said. “Russia might also retaliate by leveraging its influence within OPEC+ to push for more production cuts down the road, thus exacerbating the global energy crisis.”
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