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OPEC+ keeps steady policy amid weakening economy, Russian oil cap

Published 12/04/2022, 05:04 AM
Updated 12/04/2022, 05:20 PM
© Reuters. FILE PHOTO: An OPEC sign is seen on the day of OPEC+ meeting in Vienna  in Vienna, Austria October 5, 2022. REUTERS/Lisa Leutner

By Alex Lawler, Ahmad Ghaddar and Olesya Astakhova

LONDON/DUBAI (Reuters) -OPEC+ agreed to stick to its oil output targets at a meeting on Sunday as the oil markets struggle to assess the impact of a slowing Chinese economy on demand and a G7 price cap on Russian oil on supply.

The decision comes two days after the Group of Seven (G7) nations agreed a price cap on Russian oil.

OPEC+, which comprises the Organization of the Petroleum Exporting Countries (OPEC) and allies including Russia, angered the United States and other Western nations in October when it agreed to cut output by 2 million barrels per day (bpd), about 2% of world demand, from November until the end of 2023.

Washington accused the group and one of its leaders, Saudi Arabia, of siding with Russia despite Moscow's war in Ukraine.

OPEC+ argued it had cut output because of a weaker economic outlook. Oil prices have declined since October due to slower Chinese and global growth and higher interest rates, prompting market speculation the group could cut output again. [O/R]

But on Sunday the group of oil producers decided to keep the policy unchanged. Its key ministers will next meet on Feb. 1 for a monitoring committee while a full meeting is scheduled for June 3-4.

On Friday, G7 nations and Australia agreed a $60 per barrel price cap on Russian seaborne crude oil in a move to deprive President Vladimir Putin of revenue while keeping Russian oil flowing to global markets.

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Moscow said it would not sell its oil under the cap and was analysing how to respond.

Many analysts and OPEC ministers have said the price cap is confusing and probably inefficient as Moscow has been selling most of its oil to countries like China and India, which have refused to condemn the war in Ukraine.

Neither an OPEC meeting on Saturday nor the OPEC+ meeting on Sunday discussed the Russian price cap, sources said.

Russia's Deputy Prime Minister Alexander Novak said on Sunday Russia would rather cut production than supply oil under the price cap and said the cap may affect other producers.

Sources have told Reuters several OPEC+ members have expressed frustration at the cap saying the anti-market measure could ultimately be used by the West against any producer.

The United States said the measure was not aimed at OPEC.

JP Morgan said on Friday that OPEC+ could review production in the new year based on fresh data on Chinese demand trends and consumer compliance with price caps on Russia crude output and tanker flow.

Latest comments

people seem to have hot air balloon expectation on stock mkt these days. if stock falls to double bottom, people would become as dismal as trapped in a dark dundgen. human nature.
The oil cap is a Trojan horse, offered by West to Chinese. The cap aims to lure China in demanding deep discounts from Russians, because their oil cannot be sold to many other customers. Will China take the bait?  Maybe not, because Chinese are not fools. They will continue asking for moderate discounts only to prolong very profitable business, while keeping Russians happy.
Saudis produce oil and make money, EU makes caps and produces zilch. Good enough, US still produces oil, mostly because Republicans sometimes take power and restore common sense.
What happens if oil goes below 60 a barrel like normal?
brent oil sell option buy or not
OPEC+ leaves their agreement unchanged….. Yes, because they know that the Russian response to the G7 price cap is going to be a production cut of 500k-1M bbls/day. So OPEC doesn’t need yo do anything to raise the price.
oil will be at 90 next week
No way that is the opposite of what will happen. its more likely to hit 59 then 90
I agree that oil will go up before ot goes down. There isn’t enough production for the market to handle 2-3 million barrels cut. This will keep prices elevated. Without the SPR the drawdown on oil storage was huge. Biden is going to get so far on the wrong side of this that oil could bypass the highs made earlier this year. With demand strong its only a matter of time.
"two OPEC+ sources told Reuters" is the most important phrase in this article. Are these the same sources who allegedly told the WSJ that OPEC+ was considering increasing production?
Im sure they did consider it
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