OPEC+ maintains oil production levels in an unstable context

OPEC+ members decided on Sunday to maintain their oil production levels in a particularly unstable context, the eve of the entry into force of sanctions against Russian crude.

The representatives of the thirteen members of the Organization of the Petroleum Exporting Countries (OPEC), led by Saudi Arabia, and its 10 allies, led by Russia, agreed to maintain the current trend decided in October, with a reduction of two million barrels per day. until the end of 2023, two participants in the meeting informed AFP.

OPEC+ confirmed in a statement that it maintains the October decision, which had been taken to maintain prices and had provoked the wrath of the White House, which sought at all costs to reduce prices at gas stations.

Since then, the prices of the two world references for black gold have lost ground and are now between 80 and 85 dollars, far from their highs of more than 130 dollars reached in March after the start of the invasion of Ukraine.

This, in retrospect, validates our strategy,” the cartel said. “It was the right way to go to stabilize the markets,” it argued.

The next meeting was set for June 4, 2023, but the group was willing to meet “at any time” between now and take “immediate further action” if necessary.

Spotlights on Russia

The decision, which did not cause any surprise, was made after a quick meeting by videoconference.

The status quo is justified by “uncertainty about the impact on Russian crude production” of the new sanctions package, Giovanni Stauvono, a UBS analyst, told AFP.

Russia is outraged at the decision by the European Union, the G7 and Australia to limit the price of its oil, which will take effect on Monday “or shortly thereafter”.

The Ural crude oil price per barrel is currently around $65, just above the $60 ceiling, implying limited short-term effect.

The Kremlin threatened to suspend deliveries to any country that adopted the measure, a position reaffirmed on Sunday by Russia’s Deputy Prime Minister for Energy, Alexandre Novak.

Quoted by Russian press agencies, Novak said that Russia is working “on mechanisms to prohibit the use of the price cap tool, whatever the price set.”

“These interferences can only lead to further destabilization of the market and a shortage of energy resources,” he added.

Also on Monday, the EU embargo on maritime deliveries of Russian crude will begin.

It will prevent shipments of Russian crude in tankers to the EU, which account for two-thirds of imports, which would reduce Russia’s coffers for the war in Ukraine by billions of euros.

prices down

Another element that influenced OPEC+’s decision, according to the UBS expert, was “a certain relaxation” of the strict sanitary restrictions in China, which could reduce market concerns.

Demand from this country, which is the world’s leading importer of crude oil, is closely scrutinized by investors, and the slightest sign of a slowdown in the economy or a resurgence of epidemics has a direct impact on prices.

Against this bleak outlook and against fears of a global recession, North Sea Brent and its US equivalent, WTI, have fallen by around 8% since the alliance’s last meeting in early October.

Although OPEC+ opted for caution on Sunday, the alliance could in the coming months “take a more aggressive stance” in a warning to the West, predicts UniCredit analyst Edoardo Campanella.

This could “worsen the global energy crisis,” he warned. And it could anger Washington, whose diplomatic efforts to get prices down have failed.