OPEC+ ministers set to stay the course on oil production amid China covid woes

AP
AP

Summary

  • OPEC oil ministers are planning to meet virtually Wednesday

An OPEC+ panel will likely recommend keeping the group’s current oil-production policy unchanged Wednesday, delegates said, amid uncertainties about demand in China and the impact of sanctions on Russian crude supplies.

Maintaining the status quo will allow the Organization of the Petroleum Exporting Countries and a group of producers led by Russia—collectively known as OPEC+—to take more time to assess consumption data from China, the world’s biggest oil importer, and determine how a resurgence of Covid-19 cases there and European Union sanctions on Moscow have affected demand.

Delegates said that OPEC+ will remain conservative in their approach until there are clearer signals that markets require higher crude supplies.

OPEC+ decided in December to lock in a 2 million-barrel-a-day production cut that had been decided in October. The decision suggests that the world’s leading oil producers are uncertain about the direction of crude prices, ahead of a price cap on Russian petroleum exports set to take effect.

Oil prices have stabilized in recent weeks above $80 a barrel as fear of supply disruptions following escalating Western oil sanctions on Russia were offset by concerns over a resurgence of Covid-19 cases in China. On Wednesday morning, Brent, the international oil contract, traded at $85.67 a barrel, up 0.3% on the day but down 4% compared with a year earlier.

The alliance isn’t planning to review its production until its next meeting in June but the panel meeting Wednesday, known as the Joint Ministerial Monitoring Committee, can call for a full OPEC+ meeting if warranted.

Last month, OPEC left its forecast for global oil demand and global economic growth largely unchanged but warned that China’s reopening could be bumpier than expected and pointed to risks, such as a resurgence of Covid-19 cases, that could delay a rebound in crude demand.

The Vienna-based oil producers’ group kept its forecasts for global oil-demand growth steady for the second month in a row. Its forecasts for global economic growth this year were also left unchanged for a third month, though OPEC raised slightly its expectations for the economies of Europe and the U.S.

OPEC’s cautious outlook stands in contrast to that of many oil analysts and some investors, who are betting that China’s reopening could cause oil demand to rebound and push prices higher this year after several months in the doldrums.

Western sanctions on Russian fossil fuels are accelerating the shift in global energy flows, with China and India increasingly taking advantage of Russian oil discounts and Middle Eastern suppliers redirecting their crude to Europe.

Russia is offering deep discounts to Asia’s biggest oil buyers as it tries to retain market share after banning the sale of its crude and petroleum products to countries imposing a price cap. The cap bars the shipping, financing or insuring of Russia’s seaborne crude unless it is sold for $60 a barrel or less—a sanction leveled in response to the invasion of Ukraine.

Meanwhile, Saudi Arabia, the United Arab Emirates and other major Middle Eastern energy exporters are shifting focus from their traditional markets in Asia to sell to Europe at premium prices.

This story has been published from a wire agency feed without modifications to the text

Catch all the Industry News, Banking News and Updates on Live Mint. Download The Mint News App to get Daily Market Updates.
more

MINT SPECIALS

Switch to the Mint app for fast and personalized news - Get App