The OPEC+ group is not expected to intervene in the oil market with changes to its production policy, likely keeping the current quotas until the end of 2023, despite the oil price plunge and the financial markets turmoil, three OPEC+ delegates told Reuters on Wednesday.
Oil suffered a 10% slide in the past two weeks, triggered by concerns about the health of the U.S. and European banking sectors and possible wider implications for the global economy.
However, OPEC+ is set to stick to the agreement from October 2022 to cut production by 2 million barrels per day (bpd) until 2023, according to delegates from the alliance.
“No changes for the group until the end of year,” one delegate told Reuters.
OPEC+ doesn’t plan additional cuts to help prop up prices, another delegate said, and a third representative from the group told Reuters that the price slump was driven by speculative trading, not oil market fundamentals.
Russia, part of the OPEC+ alliance leading the non-OPEC producers in the deal, said on Tuesday that it would continue its 500,000-bpd oil production cut through the end of June this year.
Last week, consultants at Energy Aspects said that OPEC+ would not be racing to react to the oil price plunge and would wait for financial markets to calm down after the banking sector scare.
“It would be premature for OPEC+ to take action without first understanding what the risks are,” Energy Aspects analysts said in a note carried by Bloomberg.
Earlier last week, before the Credit Suisse scare spooked markets, Saudi Arabia’s Energy Minister Prince Abdulaziz bin Salman told Energy Intelligence that OPEC+ would keep its oil production targets unchanged until the end of the year in view of the high level of uncertainty on the global markets and with global economic growth.
The OPEC+ Joint Ministerial Monitoring Committee (JMMC), the panel recommending oil policy actions, has a meeting slated for April 3.
By Charles Kennedy for Oilprice.com
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1- It believes that the current banking difficulties which were triggered by the collapse of the Silicon Valley Bank will be contained and prevented from developing into a full-fledged financial crisis.
2- Oil prices will soon recoup all recent losses.
3- The global oil market is balanced.
4- Moreover, Russia’s cut of 500,000 barrels a day (b/d) which was extended yesterday until the end of June obviates the need for OPEC+ to cut production.
Dr Mamdouh G Salameh
International Oil Economist
Global Energy Expert