The OPEC+ coalition is showing no signs of adjusting oil production next week, staying the course amid turbulence in financial markets.
blue oil barrel with OPEC logo
Group leader Saudi Arabia has said publicly that the 23-nation alliance should keep supplies steady for the whole of 2023 as it navigates a fragile recovery in global oil demand. Delegates from the group say privately that an online meeting of key ministers on Monday is set to maintain this position.
With turmoil in the banking sector affecting the economic outlook and sanctions on Russia creating uncertainty about supply, there’s no need to deviate from the current plan, the delegates said, asking not to be named because the information is private.
Fourteen traders and analysts polled by Bloomberg also unanimously predicted no change from the OPEC+ Joint Ministerial Monitoring Committee, which has the power to call an emergency meeting if it thinks a change in production policy is necessary.
“I suspect they’ll be keeping their heads down and eyes open,” said Bob McNally, president of Rapidan Energy Group and a former White House official. “It’s too soon for any firm conclusions that would trigger a recommendation to call a ministerial meeting before June 4, much less adjust quota policy.”
Crude prices slumped to a 15-month low last week on fears that the economic fallout from the collapse of Silicon Valley Bank and the takeover of Credit Suisse Group AG would hurt oil demand. But futures have since recovered, trading near $78 a bbl in London on Tuesday and easing any pressure on the Organization of Petroleum Exporting Countries and its partners to shore up markets.
Saudi Energy Minister Prince Abdulaziz bin Salman has been particularly clear that current output targets shouldn’t be changed. The quota limits, which amounted to a 2 million barrel-a-day cut in oil production when they were agreed in October, are “here to stay for the rest of the year, period,” he said last month.
Expectations for the return of $100-a-barrel crude, which were widespread across the industry at the start of the year, have cooled in recent weeks. Yet major traders including Trafigura Group Pte Ltd. and Gunvor Group Ltd. are still predicting a rally in the second half of 2023.
If they are correct, OPEC+ could come under pressure later in the year to move in the opposite direction — increasing production as China’s post-Covid recovery gathers pace and global supply tightens.
The alliance is due to review output policy for the final six months of 2023 at a meeting at its Vienna headquarters in early June.
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