OPEC+, a group of 23 oil-producing countries led by Saudi Arabia and Russia, will meet on Sunday to decide on the next phase of production policy.
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Oil producers inside and outside OPEC could impose deeper oil production cuts on Sunday, energy analysts said, as the influential energy alliance weighs the impact of the ban. Russia’s crude oil exports pending and the possibility of Russia’s oil price ceiling.
OPEC+, a group of 23 oil-producing countries led by Saudi Arabia and Russia, will meet on Sunday to decide on the next phase of production policy.
The much-anticipated meeting comes ahead of potentially disruptive sanctions on Russian oil, weakening crude demand in China and raising fears of an economic slowdown.
Claudio Galimberti, senior vice president of analysis at energy consulting firm Rystad, told CNBC from OPEC’s headquarters in Vienna, Austria, that he believes the group is “better to stay on track” and maintain current production policy.
“OPEC+ has been rumored to be considering cuts on the basis of weak demand, especially in China, over the past few days. However, China’s traffic across the country has not decreased significantly,” Galimberti said.
Energy market participants stay alert on European Union sanctions on the Kremlin’s purchases of crude oil exports by sea on December 5, while the possibility of the G-7 imposing a price ceiling on Russian oil is one cause. other destabilizing.
The 27-nation EU bloc agreed in June to ban purchases of Russian seaborne crude from December 5 as part of a concerted effort to limit the Kremlin’s war budget in the wake of the invasion. Moscow’s Ukraine.
However, concerns that an outright ban on Russian crude oil imports could send oil prices soaring, prompted the G-7 to consider a price ceiling on how much they would pay for Russian oil.
No formal agreement has been reached yet, though Reuters reported On Thursday, EU governments temporarily agreed to a price ceiling of $60 a barrel for Russian seaborne oil.
“The other factor that OPEC will need to consider is really the price ceiling,” said Galimberti. “It’s still up in the air, and this adds to the uncertainty.”
The former Kremlin was warning that any attempt to impose a price ceiling on Russian oil would do more harm than good.
‘Too many uncertainties’
OPEC+ agreed in early October to reduce production by 2 million barrels per day from November. It happened despite calls from the United States for OPEC+ to pump more to lower fuel prices and support the global economy.
The Energy Alliance recently hinted that it could impose deeper production cuts to spur a recovery in crude prices. The signal comes despite a report from The Wall Street Journal suggesting a production increase of 500,000 barrels per day is being discussed on Sunday.
OPEC+ agreed in early October to reduce output by 2 million barrels per day from November. It happened despite calls from the United States for OPEC+ to pump more to lower fuel prices and support the economy. global economy.
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Speaking earlier this week, Helima Croft of RBC Capital Markets said there was no expectation of a production increase from the upcoming OPEC+ meeting and a “significant chance” of deeper production cuts.
“There’s so much uncertainty,” Croft told CNBC’s “Squawk Box” on Tuesday. OPEC delegates “have to take into account what happens to China as well as what happens to Russian production.”
“My expectation right now is that, if prices are fluctuating with Brent entering the 70s, OPEC will certainly cut deeper, but the question is, how do they account for what will happen? happened the next day?” Croft said. “So I still think it’s ready to take.”
Oil prices, which have plummeted in recent months, were trading slightly lower ahead of the meeting.
International Brent Crude Oil Futures were trading 0.2 percent lower at $87.78 a barrel on Friday morning in London, down from more than $123 in early June. US West Texas Intermediate Futuresmeanwhile, is down 0.3% to trade at $80.95, compared with $122 six months ago.
“Minimize any negative surprises in the OPEC+ online talks on Sunday and assume a healthy compromise on price caps,” said Tamas Varga, analyst at brokerage PVM Oil. Russian oil before the EU sanctions came into effect on Monday, it is difficult to boldly conclude that the bottom has been found. Associates, said in a note Thursday.
Varga said oil prices trading below $90 a barrel are “unacceptable” for OPEC and Russia is expected to introduce retaliatory measures against the signatories of the G-7 agreement.
“Chaotic and anxious market conditions will prevail, but the new month will bring more joy than November,” he added.
‘High probability’ of production cuts
Jeff Currie, global head of commodities at Goldman Sachs, said OPEC ministers will need to discuss whether to respond to even weaker demand in China.
“They have to deal with the fact that demand in China is falling, prices are reflecting that, and will they be able to meet that weak demand?” Currie told CNBC’s Steve Sedgwick on Tuesday.
“I think there is a high probability that we will see a cut,” he added.
Analysts at political risk consultancy Eurasia Group said lower oil prices “increase the risks” of new OPEC+ production cuts.
“Ultimately, the decision will depend on the trajectory of oil prices when OPEC+ meets and the extent of disruptions evident in the market due to EU sanctions,” said analysts at Eurasia Group led by Raad Alkadiri. learned Monday in a research report.
If Brent crude futures fall below $80 a barrel for a long time before the meeting, Eurasia Group said OPEC+ leaders could push for another round of production cuts to support prices and bring Brent crude. forwards back to around $90 – a level that “looks like they’re going to favor.”
