OPEC and its allies are expected to keep the group’s oil production targets unchanged when they meet this weekend, with an eye on the impact of European sanctions targeting Russian oil that come into effect next week.
The OPEC+ group, which includes Saudi Arabia and Russia as its two biggest producers, could still decide to make a small production cut, according to people familiar with the group’s discussions, but is leaning towards the postponement of the objectives of production.
The group was due to meet at Opec headquarters on Sunday, but this week changed course to hold the meeting online, in a sign that many interpreted as the group not planning any drastic policy changes.
“That means they’ve already made a decision,” said Jorge León, a former OPEC official now at energy consultants Rystad.
“Normally, if there is no agreement before the meeting, it makes sense to bring 23 ministers to the table.”
At the last Opec+ meeting in October, the first face-to-face meeting since the start of the coronavirus pandemic, the group agreed to a reduction in production quotas of 2 million barrels per day, but had to face a violent reaction from the United States and other consumer countries.
While Saudi Arabia has argued that OPEC+ is cutting production due to concerns over a slowing global economy, the White House has accused its longtime ally of effectively siding with Russia.
Russia has cut gas supplies to Europe since its invasion of Ukraine, triggering an energy-related cost-of-living crisis that has left many countries struggling with inflation.
Oil price reaction since the OPEC+ cuts has been limited, however, with Brent, the international benchmark, trading at $87 a barrel on Friday – close to where it was when it became clear in October. Saudi Arabia was leading a push to lower production.
Oil prices jumped immediately after Russia invaded Ukraine and were trading at $120 a barrel as recently as June.
But they have cooled roughly where they were trading at the start of the year, with Russian oil exports falling only slightly since the invasion and China’s zero Covid policy crimping demand.
That could change in the coming weeks, however, as European sanctions banning maritime imports of Russian crude come into effect on Monday, with restrictions on refined fuels to follow in February.
The G7 is also launching a so-called price cap that aims to keep Russian oil flowing to other countries like India and China – granting waivers from sanctions aimed at transporting Russian crude – but at a price set by Western powers. The EU agreed on Friday to set the price at $60 a barrel.
Russia has repeatedly said it will not deal with any countries using price caps, fearing it could retaliate by cutting off pipeline flows to Europe that were exempt from sanctions.
Amrita Sen of consultancy Energy Aspects said there were “huge unknowns”.
“It’s prudent for OPEC+ to stay stable rather than add to volatility.”
Officially, the next OPEC+ meeting after Sunday is only scheduled for June. But Sen said the cartel could take action later in December or early next year to increase or reduce supply if necessary.
“We think if the market warrants it, they will meet at short notice,” she said.
