OPEC and non-OPEC oil producers may enforce deeper production cuts on Sunday, according to energy analysts, as the impactful energy coalition considers the effect of a potential ban on Russian crude exports and a price cap on Russian oil.
On Sunday, OPEC+, a group of 23 oil-producing countries led by Saudi Arabia and Russia, will meet to decide on the next phase of production policy.
The highly anticipated meeting comes ahead of potentially disruptive sanctions on Russian oil, weakening Chinese crude demand, and growing concerns about a recession.
Claudio Galimberti, senior vice president of analysis at energy consultancy Rystad, told Reuters from OPEC's headquarters in Vienna, Austria, that the organization "would be better off staying the course" and maintaining current production policy.
“OPEC+ has been rumored to consider a cut on the basis of demand weakness, specifically in China, over the past few days. Yet, China’s traffic nationwide is not down dramatically,” Galimberti said.
Energy market participants are still wary of the European Union's December 5 sanctions on purchases of the Kremlin's seaborne crude exports, while the prospect of a G-7 price cap on Russian oil adds to the uncertainty.
The EU's 27-nation bloc agreed in June to prohibit the purchase of Russian seaborne crude beginning on December 5 as part of a coordinated effort to reduce the Kremlin's war chest following Moscow's invasion of Ukraine.
Concerns that an outright ban on Russian crude imports would send oil prices soaring prompted the G-7 to consider imposing a price cap on Russian oil.
Although no formal agreement has been reached, Reuters reported Thursday that EU governments had tentatively agreed to a $60 per barrel price cap on Russian seaborne oil.
“The other factor OPEC will need to consider is indeed the price cap,” Galimberti said. “It’s still up in the air, and this adds to the uncertainty.”
The Kremlin has previously warned that imposing a price cap on Russian oil would do more harm than good.
OPEC+ agreed in early October to cut output by 2 million barrels per day beginning in November. It came despite US calls for OPEC+ to pump more in order to lower fuel prices and help the global economy.
The energy alliance recently hinted that it may impose deeper output cuts in order to stimulate a recovery in crude prices. This signal came despite The Wall Street Journal reporting that a 500,000 barrel per day increase was being discussed for Sunday.
OPEC+ agreed in early October to cut output by 2 million barrels per day beginning in November. It came despite US calls for OPEC+ to pump more in order to lower fuel prices and help the global economy.
RBC Capital Markets' Helima Croft said earlier this week that there was no expectation of an increase in output from the upcoming OPEC+ meeting and that there was a "significant chance" of a deeper output cut.
“There is so much uncertainty,” Croft told CNBC’s “Squawk Box” on Tuesday. OPEC delegates “have to factor in what happens with China but also what happens with Russian production.”
However, after learning that the meeting will be held virtually rather than in person on Sunday, Croft wrote in a research note that OPEC had chosen "no-drama optics," which "seems to increase the likelihood of a rollover decision."
“Irrespective of whether the group chooses to stay the course or cut deeper, we expect key ministers to signal a willingness to meet quickly to address any major change in market conditions that may be arising in the coming weeks and months,” she said in the note.
(Source:www.financialtribune.com)
On Sunday, OPEC+, a group of 23 oil-producing countries led by Saudi Arabia and Russia, will meet to decide on the next phase of production policy.
The highly anticipated meeting comes ahead of potentially disruptive sanctions on Russian oil, weakening Chinese crude demand, and growing concerns about a recession.
Claudio Galimberti, senior vice president of analysis at energy consultancy Rystad, told Reuters from OPEC's headquarters in Vienna, Austria, that the organization "would be better off staying the course" and maintaining current production policy.
“OPEC+ has been rumored to consider a cut on the basis of demand weakness, specifically in China, over the past few days. Yet, China’s traffic nationwide is not down dramatically,” Galimberti said.
Energy market participants are still wary of the European Union's December 5 sanctions on purchases of the Kremlin's seaborne crude exports, while the prospect of a G-7 price cap on Russian oil adds to the uncertainty.
The EU's 27-nation bloc agreed in June to prohibit the purchase of Russian seaborne crude beginning on December 5 as part of a coordinated effort to reduce the Kremlin's war chest following Moscow's invasion of Ukraine.
Concerns that an outright ban on Russian crude imports would send oil prices soaring prompted the G-7 to consider imposing a price cap on Russian oil.
Although no formal agreement has been reached, Reuters reported Thursday that EU governments had tentatively agreed to a $60 per barrel price cap on Russian seaborne oil.
“The other factor OPEC will need to consider is indeed the price cap,” Galimberti said. “It’s still up in the air, and this adds to the uncertainty.”
The Kremlin has previously warned that imposing a price cap on Russian oil would do more harm than good.
OPEC+ agreed in early October to cut output by 2 million barrels per day beginning in November. It came despite US calls for OPEC+ to pump more in order to lower fuel prices and help the global economy.
The energy alliance recently hinted that it may impose deeper output cuts in order to stimulate a recovery in crude prices. This signal came despite The Wall Street Journal reporting that a 500,000 barrel per day increase was being discussed for Sunday.
OPEC+ agreed in early October to cut output by 2 million barrels per day beginning in November. It came despite US calls for OPEC+ to pump more in order to lower fuel prices and help the global economy.
RBC Capital Markets' Helima Croft said earlier this week that there was no expectation of an increase in output from the upcoming OPEC+ meeting and that there was a "significant chance" of a deeper output cut.
“There is so much uncertainty,” Croft told CNBC’s “Squawk Box” on Tuesday. OPEC delegates “have to factor in what happens with China but also what happens with Russian production.”
However, after learning that the meeting will be held virtually rather than in person on Sunday, Croft wrote in a research note that OPEC had chosen "no-drama optics," which "seems to increase the likelihood of a rollover decision."
“Irrespective of whether the group chooses to stay the course or cut deeper, we expect key ministers to signal a willingness to meet quickly to address any major change in market conditions that may be arising in the coming weeks and months,” she said in the note.
(Source:www.financialtribune.com)
