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OPEC+ Keeps Oil Curbs Despite Russia Price Cap

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https://www.wsj.com/articles/opec-gathers-to-decide-output-with-russian-oil-price-cap-looming-11670116254
 
OPEC+ Keeps Oil Curbs Despite Russia Price Cap
 
Group led by Saudi Arabia and Russia also faces slowing demand in China
 
By Benoit Faucon and Summer Said
 
Updated Dec. 4, 2022 at 7:50 am ET
 
OPEC+ agreed Sunday to stick to its oil-output targets two days after the Group of Seven nations agreed to a price cap on Russian oil, amid mounting concerns over new Covid-related lockdowns in China and lingering uncertainty over Russia’s ability to export crude.
 
During a virtual meeting, the Organization of the Petroleum Exporting Countries and the Russia-led bloc—a group collectively known as OPEC+—decided to maintain production cuts of 2 million barrels a day initially agreed to in October, OPEC said.
 
Known in OPEC parlance as a “rollover,” it will allow the group time to assess the market impact of the price cap of $60 a barrel on Russian oil, the delegates previously said.
 
Some members had previously considered the possibility of a production increase to fill a possible gap in Russian output. But members are now grappling with oil prices that have fallen 13% in the past month.
 
Brent crude, the international benchmark, was at $85.42 on Friday, and West Texas Intermediate, the U.S. benchmark, was at $80.34—far below the $90-a-barrel level where some oil-market analysts say the group wants to see prices.
 
Prices have come under downward pressure from Chinese Covid-19 lockdowns that have prompted concerns in OPEC of weakening oil demand.
 
Oil prices fell Friday after the EU agreed to the cap, as traders discounted fears the mechanism will force much Russian oil out of the market and cause a supply issue. Russian crude has traded at a steep discount this year, with Argus Media, which assesses commodity prices, pegging the price at about $48 a barrel.
 
The U.S. and its allies designed the price to cut into Moscow’s oil revenues while keeping Russian oil, a key part of global supply, available on the market. It aims to take advantage of the concentration of key maritime services in the West to try to curb Moscow’s ability to wage war in Ukraine.
 
Still, OPEC delegates have said the production plans might be raised early next year. They said they trust estimates that Russian oil exports could fall by more than 1 million barrels a day of crude due to the price cap. The prediction is consistent with the International Energy Agency, which advises consumer nations, and foresees a decline of 1.4 million barrels a day. Russian oil production stood at 9.9 million barrels a day in October.
 
The alliance isn’t planning to review its production until its next meeting on June 4. But OPEC said Sunday it was ready “to meet at any time and take immediate additional measures to address market developments” if needed.
 
OPEC+’s decision to cut production in October angered the White House and congressional Democrats, who said it undermined global efforts to blunt Russia’s war in Ukraine and viewed it as a political slap in the face to President Biden ahead of midterm elections. But U.S. officials have said privately in recent days they wouldn’t complain to the cartel if it kept curbs as prices have eased significantly, according to people familiar with the matter.